PSA and Hafei to open new JV in Shenzhen

French carmaker PSA Peugeot Citroen plans to assemble high-end vans with China's main mini-van producer Hafei Automobile, to further explore the world's second-biggest vehicle market. The production will be carried out in Hafei Automobile's existing plant located in Shenzhen.

According to a memorandum of understanding signed recently in Beijing, the two parties will create a 50-50 joint venture to manufacture and sell vans with ten seats or less in the Chinese market.

Denis Duchesne, CEO of the French carmaker's China operations, said the vans will be made under the Peugeot, Citroen and Hafei badges with an initial capacity of 100,000 units a year. Currently Hafei's production base in Shenzhen already has a production capacity of 100,000 units. The tie-up with Hafei is PSA Peugeot Citroen's latest drive to boost its China sales to 600,000 vehicles in 2010 from 200,000 units last year, Duchesne said.

The French carmaker currently assembles cars in the central city of Wuhan with Dongfeng Motor Corp, China's No. 3 auto group. However, it is still lagging behind its rivals in terms of China sales. General Motors, Volkswagen, Toyota and Honda all run two vehicle ventures in the country with local partners.

Sales of China-made vehicles surged by 22 percent to 3.65 million units in the first five months of this year from a year ago, according to industry data. Full-year sales are forecasted to reach 8.5 million units, up from 7.22 million units in 2006.