China’s Dongfeng, French govt. to invest $1.1bn in Peugeot

PanARMENIAN.Net - Chinese automaker Dongfeng and the French government are each investing 800 million euros ($1.1 billion) in Peugeot, throwing a financial lifeline to the struggling French auto brand and possibly expanding its global presence, the Associated Press reports.

Plans call for Dongfeng Motor Co., the French government and the Peugeot family each to own equal shares in PSA Peugeot Citroen and to have equal voting rights, Dongfeng said in a statement Wednesday, Feb 19.

China's auto market is the world's biggest by number of vehicles sold but is crowded and competitive, with every global brand and two dozen indigenous automakers jostling for sales.

Dongfeng said the French government is expected to buy the same number of shares as it on the same terms. That would bring Peugeot at least 1.6 billion euros ($2.2 billion), less than the 3 billion euros ($4.1 billion) it said earlier it hoped to raise.

Dongfeng said it and Peugeot will expand cooperation in technology, research and development, manufacturing and overseas distribution. It said the two sides will sign a formal agreement in March and continue work on their strategic partnership.

Wednesday's brief announcement gave no additional details, including about how the owners will manage a potentially unwieldy structure with ties to both the French and Chinese governments, the AP said.

Peugeot is France's biggest automaker and Europe's second-biggest after Volkswagen AG. But it has little presence in the United States or East Asia. It has developed models specifically for China, including its 408 sedan, and has a joint venture with Dongfeng, but barely ranks among the country's top 10 brands in sales.

Sales by the Dongfeng Peugeot Citroen joint venture rose 25 percent last year to 554,000 vehicles, for a 3.5 percent share of the market, according to LMC Automotive Ltd., a research firm. By comparison, VW and its main Chinese partner had a 9.9 percent market share last year and GM and its main partner had 9.8 percent.

Peugeot, founded in 1810, manufactured its first gasoline-powered automobile in 1890.

Dongfeng, founded in 1969 and headquartered in the central Chinese city of Wuhan, is one of China's biggest auto producers but is largely unknown abroad. In addition to its joint venture with Peugeot, it assembles vehicles for Japan's Nissan Motor Co. and Honda Motor Co. and manufacturers cars and trucks under its own name.