Dongfeng Peugeot Citroen and other automobile manufacturers look to western China

Gasgoo.com (Shanghai October 23) - Multinational automobile enterprises have been responding to favorable government policies encouraging development in China's western regions. Dongfeng Peugeot Citroën has already begun constructing its 12.3 billion RMB ($2.01b) fourth production site in Sichuan's capital of Chengdu. The site, which is designed to possess an annual production capacity of 360,000 vehicles, is scheduled to begin operation by the end of 2016. It will be responsible for producing premium SUV and minivan models for the Dongfeng Peugeot and Dongfeng Citroën lines. Other international manufacturers have also begun following suit, with VW, Toyota and Volvo have also begun establishing production sites of their own in the west of the country.

Chengdu is leading the charge as China's automotive industry moves west. In addition to increased market prospects, manufacturers are drawn by lower production costs and attractive investment incentives. Dongfeng Peugeot Citroën General Manager Qiu Xiandong explained that Chengdu offers the perfect vantage point to sell to the rest of the west, possesses solid infrastructure and other market advantages.

According to statistics, the western regions of China accounted for 17.5 percent its total automobile sales in 2013, growing over a percent point from the previous year. At the same time, sales proportions of the developed eastern and northern regions fell. Xu Changming, director of the State Information Center's Resource Development Department , predicts the country's western and central regions to account for 55 percent of the country's total automobile sales by 2020.

Industry Analyst Zhang Zhiyong expects Dongfeng Peugeot Citroën to build more plants outside of its home city of Wuhan if its sales are successful enough. Mr. Zhang explains that as long as automobiles are successful in their target market, it is only a matter of time before production facilities are build close by to minimize logistics costs and gain local government support.

According to PSA Group's development strategy, eight percent of its 2015 sales are expected to come from the China market, with over half of those sales being conducted by the Dongfeng Peugeot Citroën joint venture. Mr. Qiu expects Dongfeng Peugeot Citroën's sales to break the one million barrier by 2017. He explains: "By the end of 2016, when our [Chengdu] factory is complete, Dongfeng Peugeot Citroën will possess an annual production capacity of one million automobiles and 1.2 million engines through its Wuhan, Xiangyang and Chengdu production sites. It will sell passenger automobiles targeting the premium, entry-level and economic segments."