PSA better placed than rival Renault in key China
As European scrappage incentives wane, PSA Peugeot Citroen wants a bigger slice of the booming Chinese market, and analysts prefer its stretch targets to Renault's caution.
Fast-growing China represents the biggest prize for European companies seeking growth, and is firmly in focus after PSA group underlined the importance of Asia to its strategy by boosting ties with Japanese partner Mitsubishi on Thursday.
Analysts say Mitsubishi may not be big enough to help the French company exploit key markets in the region.
When full-year sales are published, China looks set to overtake the United States as the world's largest auto market, and has been a major bright spot this year thanks to Beijing's policy incentives, including aggressive sales tax cuts for small cars, which have bolstered consumer confidence.
Industry watchers say PSA's ambitious plans for China make more sense than Renault's strategy, which is confined to sales of a tiny number of imported vehicles and a presence through its alliance partner Nissan.
"China is now or is becoming the first market in the world so being out of that market is an error," said IHS Global Insight senior market analyst Carlos da Silva.
PSA's China plans are part of a wider programme to close the profitability gap with better performing rivals. Around 15 percent of a planned 3.3 billion euro profitability boost over three years will come from upping sales in key emerging markets.
The company last month unveiled a raft of new models, including sedans designed specifically for China.
Executives and government officials say the market should grow 10-20 percent year-on-year in 2010, after a 40 percent rise in 2009 and may climb further if incentives are maintained.
PSA, present in China through a partnership with Dongfeng Motor Group Co, has already benefited from Chinese incentives. It expects its China sales to grow 50 percent this year to as much as 270,000 units this year, after a 12 percent fall in 2008, executives said.
Its presence is still small next to market leaders General Motors and Volkswagen, which sold 1.29 million and 1.06 million vehicles there in the first nine months.
MARKET SHARE BOOST
PSA, which grabbed 3.2 percent of the Chinese market in the first nine months of 2009, has not set a market share target, but has said it would like to get closer to a 10 percent share.
PSA's current vehicle line-up means it has a product that can meet the needs of 30 percent of China's market segments. It wants to boost this to 40 percent in 2012.
While analysts agree that the success of PSA's plan is far from assured, they prefer it to Renault's wait-and-see attitude, as the carmaker focuses its energies elsewhere, content to rely on Nissan's presence.
"(PSA's plan) is very ambitious but I think they are really tackling the problem," said Emmanuel Bulle, senior director of the European industrials group at Fitch Ratings.
But "it's very difficult to see how the end consumer will react and they'll be up against fierce competition," he warned.
Peugeot is scheduled to launch a brand new model, the 408, in 2010, a larger car within the medium-sized segment, followed by two more new models the year after, Timothy Zimmerman, head of Peugeot business in the French carmaker's venture with Dongfeng told Reuters at the Guangzhou Auto Show.
"What is really exciting about the 408 is that it's a car designed for the Chinese market for the first time," he said.
Citroen will in January launch C5, its most expensive car in China, following by the C4, rolled out in June.
Renault is happy for now to leave China to Nissan, apart from a tiny import presence -- it sold 3,356 cars in Hong Kong and China in the first 10 months of 2009, a drop in the ocean of a 10.89 million vehicle market.
"Everyone will come to China sooner or later," Renault and Nissan CEO Carlos Ghosn said. "The current focus of the alliance in China is to boost Nissan's business, Renault will come when it's ready," he added.
Bulle agreed that while the carmaker's strategy made short-term sense, it would eventually have to take the plunge.
"In the short-term they've got many things to do -- first address their financial issues," Bulle said. "In the medium- to long-term however, they'll have to be in China."
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