Shanghai, May 26 (Gasgoo.com) China-based joint ventures of European automakers, such as PSA Peugeot Citroen and Volkswagen AG, will benefit from a weaker euro which will reduce the cost of auto-parts imported from home countries, Bloomberg reported today, citing analysts.
Dongfeng PSA, the French automaker's China venture with local partner Dongfeng Motor Group, will be the biggest beneficiary, Yankun Hou, an analyst at Nomura said yesterday. A 15% drop in the euro may boost earnings at Dongfeng PSA by as much as 5% or 250 million yuan ($36.6 million).
The euro has fallen 14% against the Chinese yuan this year and reached a four-year low of $1.2144 on May 19, while China is also under pressure to revalue the yuan, which has been pegged at about 6.83 to the U.S. dollar for almost two years.
For European carmakers in China the import of components from their home countries is one way to make profit, as China still doesn't have the economical scale to produce high-tech components, Hong Kong-based Hou said.
Shanghai VW, a partnership between SAIC Motor and Volkswagen AG, and BMW Brilliance, BMW's China venture with local automaker Brilliance, will also benefit from a weaker euro, the Nomura report said.
