Peugeot to add 15 models for China market share

June 12 (Bloomberg) -- PSA Peugeot Citroen, Europe's second-biggest automaker, will add as many as 15 models in China by the end of 2011 as it seeks to reverse falling market share in the world's fastest-growing major auto market.

The carmaker will add two models this year, and 12 or 13 in the following three years, Claude Vajsman, its China operations chief executive office, said in an interview in Beijing today.

Peugeot's China sales to consumers rose 8 percent in the first five months, half the pace of the overall market, as drivers shunned its aging 206 compacts and other models. The automaker is banking on China, Russia and other emerging markets to generate two-thirds of its growth over the next two years.

"Given the fierce competition in China, it's vital for Peugeot to have more appealing models in the market as early as possible," said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. "It took a long time for Chinese consumers to accept French car-styling."

Higher prices for steel, aluminum and other materials will also likely wipe about 100 million yuan ($15 million) from Peugeot's China profit this year, Vajsman said. The Paris-based carmaker aims to share the increasing prices with suppliers and it's designing new parts to cut manufacturing costs.

"Rising raw material costs are having a big impact on all automakers including us," Vajsman said. "Increasing interest rates are also leading to rising costs for our dealers."

China raised interest rates six times last year. On June 7, the central bank also told lenders to set aside a record 17 percent of deposits from June 15. The world's fastest-growing major economy wants to cool lending as it battles to contain inflation close to an 11-year high.

Dongfeng Peugeot Citroen Automobile Co., Peugeot's venture with Dongfeng Motor Group Co. makes models including 206s, C2 compacts, and Citroen Fukangs in the central Chinese city of Wuhan.

Global Sales

Peugeot aims to boost global car sales to 4 million a year by 2010, 21 percent more than last year, Frederic Saint-Geours, an adviser to the carmaker's chief executive officer, said last week. The company and Mitsubishi Motors Corp. began building a factory in Russia on June 10.

Volkswagen AG, the biggest overseas carmaker in China, boosted sales in the country 28 percent in the first four months of the year. The company, Europe's largest automaker, aims to sell 1 million vehicles in China this year.

China's industrywide car sales to dealers rose 17 percent in the first five months of the year to 3.02 million.