Analysis: Peugeot in the Chinese auto market

It seems common sense that being one of the first entrants in a market would lead to success later on. However, that hasn’t seemed to work for French automotive manufacturers in the Chinese market. Guangqi Peugeot, which was established in 1985, was only the country’s second Sino-foreign joint venture company. Just a year later the newly-formed JV brought over the Peugeot 505 SW8 touring wagon to the country.

However, compared with fellow JV FAW-VW, Guangqi Peugeot failed to embrace localization, with over 60% of its vehicles parts coming from outside of the country. This is in turn led to higher vehicle prices, with sales of the 505 series beginning to decrease as early as the 1990s and falling by the triple digits by 1997. The JV incurred a deficit reaching as high as 2.9 billion RMB, and eventually sold off its stake in the JV to Japanese manufacturer Honda for one American dollar 12 years after its establishment.

Quite a long time after in 2002 Peugeot reentered the market via the Dongfeng Peugeot Citroën JV. Despite receiving negative criticism for its rigid design, the JV’s first model, the 307, still performed strongly due to the lack of competition in the Chinese auto market. The 206, which was released in 2006, finally succeeded in bringing over the sporty design that Chinese consumers had been waiting for, marking the beginning of what many assumed would be a bright and promising future for the Peugeot brand in China.

However, reality has failed to live up to those expectations. Despite the Chinese auto market undergoing a surge of rapid growth rates in the late 2000s, PSA saw very little in sales from the country, with Peugeot’s 3008 and 2008 failing to compete with SUVs from other manufacturers, while the 308S was unable to replicate the success it had seen in its native Europe. The only Peugeot models that performed somewhat well were the 308 and 408. 

Now, finally, PSA has introduced a new model which shows some promise: the second-generation 308 (pictured below).

Unfortunately, the standard version of the 308 stripped away the vast majority of standout features that many had been looking forward to, as well as many very basic features, with prospective buyers being forced to fork out over 24,000 RMB to buy the premium trim level in order to get the vehicle they were promised in previews.

While on some level the 308 can still be seen as a good move on the JV’s part, the fact of the matter is that it will be difficult to compete with the likes of the VW Lavida, Buick Excelle, Nissan Bluebird Sylphy, Toyota Corolla and Ford Focus. Without a price cut to make the vehicle more enticing to Chinese buyers, it seems unlikely that the new 308 will be able to change the fortunes of French automakers in China.