Why French automakers are poised to grab market share in China
|Yang Jian is Managing Editor of Automotive News China.|
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Peugeot, Citroen and Renault last year combined to sell fewer than 600,000 vehicles in China -- a tiny total in a market where Volkswagen Group and General Motors each sold more than 3 million units.
But PSA/Peugeot-Citroen is racing to introduce new products while Renault prepares to start local production. Soon, the French automakers will become forces to be reckoned with in China.
The French companies foundered when they initially tried to get a foothold in the market.
In 1985, PSA formed a joint venture with Guangzhou Automobile Group Co. to build Peugeot cars, but the partnership went bankrupt in 1997.
In 1992, PSA established a second joint venture, with Dongfeng Motor Corp., but sales remained sluggish as PSA delayed new products.
Meanwhile, Renault established a joint venture in 1993 to build vans with a subsidiary of China's state-owned aerospace technology company. Sales were poor, and the partnership ceased production in 2004.
These ventures failed for two reasons. First, they built European models that were not modified to meet Chinese expectations. Second, both automakers had high production costs. Most of their parts for vehicles sold in China were imported from Europe.
But now there are signs that the French automakers have learned their lessons. After studying the market, PSA and Renault are starting to introduce vehicles more suited to Chinese tastes.
Last year, PSA's partnership with Dongfeng began producing two new models -- the Peugeot 3008 compact SUV and the stretched Citroen C4. Now the partnership plans to unveil the Peugeot 2008 subcompact SUV at this month's Beijing auto show.
These products should do well, since SUVs and long-wheelbase sedans are two of China's hottest product segments.
PSA has big plans for its partnership with Dongfeng, which agreed this year to invest 800 million euros to help its French partner recover from a financial crisis.
In return, PSA has pledged to enhance the partnership's r&d and expand annual production capacity in China to 1.5 million units, up from 600,000 units today.
Likewise, PSA's joint venture with Chongqing Changan Automobile aims to increase its annual output to 200,000 vehicles next year, up from 50,000 units this year.
To boost sales, the partners introduced a compact SUV from the Citroen DS lineup at the Beijing auto show.
Renault, a late arrival in China, has been working to establish local production with its partner, Dongfeng.
Beijing approved their joint venture last year. Their assembly plant in Wuhan is expected to start production vehicles in 2016.
The plant will have an initial production capacity of 150,000 vehicles a year. Renault's first locally built model will be the successor to the Koleos compact SUV.
In total, PSA and Renault will have the combined capacity to build more than 1 million vehicles a year in 2016.
Can they sell all those cars? Despite a relatively sluggish economy, first-quarter sales in China rose 10 percent to 4.9 million units. And there are still opportunities for nimble foreign automakers.
Domestic Chinese brands, which are burdened by a poor brand image and obsolete technology, are losing market share. In the first three months of the year, domestic automakers accounted for 38.7 percent of sales in China, down from 43.2 percent a year earlier.
So there is plenty of room for the French automakers to grow in China, as long as they bring in new products and remain attentive to their customers' needs.
You can reach Yang Jian at email@example.com.