Changan-PSA venture may be based in Shenzhen

Shanghai, February 21 (Gasgoo.com) Earlier this month PSA Peugeot-Citroen was in deep talks with China's No. 4 automaker Changan Auto Group to form the French car company's second Chinese venture, which may be based in south China's Shenzhen city, media reported.

PSA Peugeot-Citroen already has a Chinese partnership with Dongfeng Motor Corp, the third-biggest Chinese automaker, in central city of Wuhan. But the JV, established in 1992, has been underperformed and PSA has been seeking a second partner in China since 2004.

When its previous potential partner Hafei Auto, a mini-van maker in northeast China, was taken over by Changan Group last year, the French company switched over to talk with Hafei's new parent. The new tie-up will likely be located in the southern city of Shenzhen, where Hafei has built a plant.

Hafei set up the Shenzhen plant in 2004 with an annual capacity of 100,000 units. Two years later the facility started producing sedans but the products didn't sell well. Hafei shuttered the factory in June 2007 and has not yet resumed production there, China Daily said.

PSA sold a record 272,000 vehicles in the Chinese market last year, up 52%, yet Peugeot-Citroen brands still trail far behind global rivals, such as General Motors, which sold 1.83 million vehicles in China last year. Volkswagen China also sold 1.4 million units.

A second tie-up is expected to boost PSA Peugeot-Citroen's production and sales in China, which last year became the world's largest market and PSA's second-biggest (after France). The carmaker aims to raise its China market share to 8% by 2016 from current 3.6%.

The Changan-PSA venture, reportedly to be launched by early 2011, may produce the Peugeot 107, 607 and the Citroen C1, C6 sedans, as well as some SUVs, since the Dongfeng-PSA venture already builds the Peugeot 207, 307, 408 and the C2, C4, C5.