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Peugeot to decide soon on third China plant

Peugeot, Europe’s number two auto maker by volume, is doubling capacity at its central China plant to 300,000 vehicles a year by 2008, and building a second facility to add capacity of 150,000 units per year.

‘We are working on a decision... on a third plant,’ Christian Streiff told Reuters on the sidelines of an industry forum in Shanghai, adding the decision would be finalised by the end of this year or the beginning of 2008.

If it decided to go ahead with the plan, the plant would be located in the central city of Wuhan or the city of Hangzhou near Shanghai and operated by Dongfeng Peugeot Citreon Automotive, its joint venture with China’s Dongfeng Motor, he said.

A third plant would also likely have an annual capacity of 150,000 cars.

Peugeot, which is also considering making commercial vehicles with another Chinese partner, was aiming to increase its market share in China to 5 percent in four years, when it is expected to move 600,000 vehicles annually, from 4 percent now, Streiff said.

Its share of the market, where major players include General Motors and Volkswagen AG, would rise further to roughly 7 percent by 2014-2015 when it expects to move 1 million vehicles, he said.

Peugeot’s sales could rise 25-30 percent this year, up from more than 200,000 vehicles in 2006, a senior company executive told Reuters in April.

New models

Peugeot, the maker of the hot-selling, medium-priced Peugeot 307 and C-triomphe sedans in China, would roll out 12 new models in the country in the run-up to 2010, Streiff said.

Its second plant, which is still under construction in central China and scheduled to start operation in 2009, will make premium models, putting Peugeot in head-on competition with BMW, Daimler and Volkswagen’s Audi division.

Premium car makers in China have been enjoying buoyant sales as the number of the wealthy consumers jumps.

The French chief executive also said Peugeot was still in discussion with China’s Harbin Hafei Automobile Industry Group Co for a possible tie-up on the production of commercial vehicles, such as light trucks and vans.

But he declined to give details. In June, the European auto maker signed a preliminary agreement with Hafei on such cooperation. A source told Reuters in September the investment would be at least 2 billion yuan ($267.6 million).

If the deal goes ahead, it would give Peugeot a foothold in China’s commercial vehicle market where Ford Motor and General Motors already have had a headstart.

‘We are working very hard to develop Dongfeng Peugeot Citreon Automotive as quickly as possible. But on top of this we’d like add additional growth potential,’ Streiff said.