Bloomberg News

Peugeot Sees China Turning Into Biggest Market as Europe Weakens

February 25, 2013

PSA Peugeot Citroen (UG) predicts China will overtake France as its biggest market from as early as 2015, as Europe’s second-largest automaker increases the number of dealerships and expands into smaller Chinese cities.

Peugeot expects to boost sales in China this year by 22 percent to 540,000 vehicles, excluding its upscale DS line, according to Gregoire Olivier, chief executive officer of its Asian operations. The Paris-based automaker plans to introduce the revamped Citroen C-Elysee and Peugeot 301 sedan models this year and is readying its flagship DS dealership in Shanghai.

“This year we expect is going to be another good year,” Olivier, who is based in Shanghai, said in a Feb. 22 interview. “We’re on a very active development plan and very nice growth.”

Gaining sales in China will help Peugeot reduce its reliance on Europe, where the market is projected to decline for a sixth consecutive year and it sells three in five vehicles. The loss-making automaker will have to wrest customers from General Motors Co. (GM:US) and Volkswagen AG (VOW), which lead among foreign nameplates in China.

“The DS brand has no influence at all in the premium segment so it’s going to be a tough challenge,” said John Zeng, Shanghai-based managing director of auto researcher LMC Automotive. “As for the Peugeot and Citroen brands, they still have lots of work to do in terms of bringing the proper products to China.”

Brand Awareness

To help increase its brand awareness among Chinese consumers, Peugeot will step up advertising and marketing activities to support its introduction of models such as the Peugeot 3008 compact crossover, according to Olivier.

Peugeot outbid Volkswagen to become the top foreign spender for prime-time advertising slots this year on state-owned China Central Television, according to Advertising Age. The French automaker declined to say how much it spent on television airtime with the broadcaster, the most widely watched in the country of 1.3 billion people.

The company plans to increase the number of dealerships for its Peugeot, Citroen and DS brands by 27 percent to 944 this year. Its cheapest offering in China is the Citroen C2, which starts from 71,800 yuan ($11,500), according to its website.

Chief Executive Officer Philippe Varin said earlier this month that the automaker will upgrade cars from the Peugeot division to differentiate them more from the company’s Citroen models and target to raise the number of upscale vehicles it sells. The company reported a 5.01 billion-euro ($6.6 billion) net loss last year.

European Decline

Industrywide European auto sales fell 7.8 percent in 2012, with Peugeot’s deliveries dropping 13 percent, according to the Brussels-based ACEA trade group. Peugeot will work toward delivering 50 percent of its vehicles outside Europe by 2015. Its home region accounted for 62 percent of the French company’s deliveries last year.

To achieve its China target, Peugeot will have to attract more customers like Wang Dong Yi, who is considering buying the Citroen C4L sedan for its design and value.

“I’ll get more features and accessories with the C4L than a Volkswagen at a similar price,” said the 24-year-old graduate, who is training to be a teacher and was visiting a Citroen dealership off Nanjing West Road in central Shanghai.

The automaker will open its third factory in the central Chinese city of Wuhan with joint venture partner Dongfeng Motor Group Co. (489) in the second half of this year, boosting its total annual capacity to 750,000 units, Olivier said.

The French automaker will produce cars for its DS line in Shenzhen with Changan Automobile Group. The first locally produced DS car will be the DS5 in October, with three more models planned in the next two years, Olivier said.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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