PSA on track to build 3rd China plant

Trade the News

Saturday September 04, 2010 08:53:17 AM GMT

* On track to build 3rd China plant with Dongfeng

* To export in small volumes from China in 2011

* See Dongfeng JV car sales up 29 percent this year

* Developing gasoline hybrid for China

By Fang Yan and Ken Wills

TIANJIN, Sept 4 (Reuters) - French carmaker PSA Peugeot Citroen is on track to build a new China car plant with Dongfeng Motor Group, and is looking to export from China as early as 2011, its Asia chief said on Saturday.

PSA Peugeot, a long-time partner of Dongfeng Motor, has been speeding up expansion in the world's biggest auto market, where General Motors and Volkswagen AG lead.

It signed a deal to set up a vehicle venture with China Changan Automotive Group in July and will start the construction of its third car facility with Dongfeng at the end of the year. The move would give PSA a combined annual capacity of 400,000 units.

"The plants are for the Chinese market. Only gradually will the export start," Gregoire Olivier told a small group of reporters in the northern municipality of Tianjin.

"We are preparing a logistic platform in Shanghai to export in Asia starting 2011, but this will be small volume."

In China, now PSA Peugeot's second-largest market, Olivier said he expected its Dongfeng venture to sell 350,000 cars this year, up 28.7 percent from a year earlier.

Eventually, the French company wants to have 8 percent of China's auto market, up from 3.3 percent now, he added.

To help get there, Olivier said he had proposed to nearly triple the number of engineers at its start-of-the-art R&D centre in Shanghai to 1,000 from 350.

China, which overtook the United States as the world's largest auto market last year, has been a major bright spot as the global industry struggles to recover from a steep downturn.

Other foreign automakers are also adding new capacity in China, betting on sustainable longer-term growth of the market where per capita car ownership remains low.

Ford Motor broke ground on a new plant in September last year, followed by a major expansion by its part-owned Jiangling Motors Corp in July this year.

Volkswagen will also started building a greenfield plant in south China with a maximum capacity of 300,000 units a year at the end of this year.

GREENER FUTURE

Beijing launched a pilot scheme in five Chinese cities in the middle of this year to subsidise green car buyers in five Chinese cities, with handouts ranging from 3,000 yuan ($440) for fuel-saving models to 60,000 yuan for electric cars.

Olivier said the policy incentives were "very important" for PSA Peugeot, which already has seven models that qualify for subsidies at the 3,000 yuan level.

The company is now developing gasoline hybrid models for China and at the same time working with Dongfeng to improve the fuel-efficiency of existing gasoline engines, he added. ($1=6.807 Yuan) (Reporting by Fang Yan and Ken Wills; Editing by Will Waterman)

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