PSA Changan faces risk of direct competitio

　　On May 4, 2010, Philippe Varin, president of PSA Peugeot Citroen (PSA) arrived in Chongqing, to sign the agreement of establishing a joint venture with Xu Liuping, chairman of Changan Auto. The two sides plan to set up a company to produce light vehicles and cars of PSA within which they respectively hold 50% shares. The two companies announced the news yesterday.

　　Since then, PSA approached to complete its six-year plan of finding another partner to establish the second joint venture in China. From Foer Ci, Streiff (both of them were former president of PSA), to current Philippe Varin, PSA finally encountered its second joint partner in China after three presidents.

　　However, paradoxically Changan and PSA didn’t propagate joyously for their partnership with only 200 words joint statement. On the May 6 of the PSA media briefing in China, Claude Vajsman, president of PSA China didn’t talk about prospect of its partnership with Changan and only showed his determination to strengthen DONGFENG PEUGEOT CITROEN AUTOMOBILE COMPANY LTD.(DPCA) “It seems that PSA is concerned about Dongfeng”, said person who is familiar with PSA.

　　Partnership with Changan

　　Yesterday, Changan Auto and PSA didn’t disclose details including investment scale, production base address and setting up time. Claude Vajsman revealed that the two sides are still negotiating and haven’t completed the final joint venture agreement.

　　But according to information revealed by a senior at Changan recently, joint venture set up by Changan and PSA would regard Hafei’s base in Shenzhen as production base. Person close to PSA also told reporters that after negotiation with Changan started, negotiating team of PSA in China once went to assess Hafei’s Shenzhen base. Result shows that PSA was quite satisfied with the base because it doesn’t cost much complete transformation of its plant.

　　In addition to producing passenger car products of PSA's, to build mini-car aircraft carrier is a big strategy for the joint venture of the two companies. Besides cars, Claude Vajsman pointed out PSA also has advantage in light commercial vehicles in Europe. Meanwhile, mini cars of Changan are excellent in China. As a result, PSA is supposed to introduce its micro-buses, mini vans and small buses into its new joint venture in China so that developing mini cars by making the most of advantages of both sides.

　　New goal of 2 million car sales

　　PSA raised its sales goal in China considering that owning two joint ventures. Philippe Varin once said the company expected to increase its market share to 8% of the Chinese car market. Claude Vajsman, nevertheless, said car sales of PSA in Chinese car market could account for 10% by 2020 with sales reach 2 million units. Car sales of PSA in 2009 accounted for about 3.5% of market share with car sales reached 270,000 units, which is still far from its purpose in 2020.

　　“It is assumed that car sales of Chinese car market will be 20 million units. In other words, it is 2 million units if our market share will increase to 10%”, said Claude Vajsman.

　　It is worth mentioning that in joint statement of Changan Auto and PSA, the two sides specifically stressed new joint venture would be in harmony with their existing joint ventures in order to avoid direct competition. On exchange meeting of the media, Claude Vajsman talked about more about prospect of DPCA. He also said products of the new joint venture would not compete with DPCA. Besides, PSA would invest to build the third plant of DPCA so as to increase its market share to 5% from now 3.5%. Since then, a senior at PSA revealed PSA would develop DPCA aggressively when interviewed by China Business News. Additionally, he said new joint venture with Changan would be put into operation 16 month to 2 years later. Before that, PSA would provide DPCA with more products.

　　Besides, Claude Vajsman announced PSA would still invest in third plant construction project of DPCA. Car sales of DPCA were more than 120,000 units in the first quarter of 2010, and its total sales goal this year is 370,000 to 400,000 units. Capacity of DPCA is thought to be saturated at the end of this year. If we combine capacity of DPCA and Hafei’s Shenzhen base together, current capacity of PSA is 650,000 units, which is close to its goal to have 5% market share in Chinese car market.

　　Although product line of PSA is relatively long, models of the Citroen and Peugeot are at the same level competitive conditions, and fail to achieve positive complement, which has been reflected on products of Dongfeng Peugeot and Citroen belong to DPCA. Once establishing partnership with Changan, PSA may have to face similar trouble. (Translator: Qinghua Wade)

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　　http://auto.sohu.com/20100507/n271967404.shtml