PSA Group and Chinese partner Changan are reportedly ready to abandon their joint venture that produces the French auto group’s upscale Citroen DS-branded cars, with a Shenzhen-based real estate developer rumored to be waiting in the wings.
Why it matters: The decision comes amid China’s worst auto industry collapse in 30 years.
- China’s auto sales plummeted 9.7% year on year to 20.4 million units for the first ten months of the year, while the annual growth of new energy vehicle sales slowed from 80% in June to a mere 10% in October, according to the China Association of Automobile Manufacturers.
- Chongqing-based Changan reported a 23.6% drop-off in sales to 1.2 million units for the first three quarters while PSA’s sales of motors made-in-China nosedived 56% to around 94,000 units over the same period.
Details: PSA Group is looking for a suitor for its 50% stake in Changan PSA Automobiles in its JV with China’s former top automaker Changan, Reuters cited a spokesman from the French firm as saying.
- PSA and Changan set up a factory in southern Shenzhen in 2011 with an annual production capacity of 200,000 units. The JV only sold 2,000 or so new cars under the DS brand in the first nine months of this year.
- Chongqing-based Changan is also putting its half up for sale as well, for a floor price of RMB 1.6 billion ($232 million), according to a filing released on the Chongqing Assets and Equity Exchange on Friday.
- Chinese property and financial services conglomerate, Baoneng Group, is reportedly ready to step in for the manufacturing base, a Chinese self-media account reported last month citing a person with knowledge of the matter.
- A spokesperson from PSA stated on Friday that the company would continue production of DS vehicles in Shenzhen after a deal with “a third party” is completed.
- Baoneng spent RMB 6.63 billion last year to become a major shareholder of a Chinese car company Qoros—the JV between Chinese automaker Chery and Isreal’s Kenon Holdings focused on the European market.
- Changan and Baoneng were not immediately available for comment.
Context: PSA’s other JV with Chinese partner Dongfeng, known as DPCA, has also lost ground against old rivals, selling 91,000 units in the first nine months in China, a tiny amount compared with sales of top global automakers Volkswagen and Toyota.
- PSA and Fiat Chrysler announced plans earlier this week to reach a binding merger deal in the coming weeks, a move that would bring the two companies together as the world’s fourth-largest automaker.