SHANGHAI, China — PSA Peugeot Citroën SA has been in talks with Chinese carmaker Chongqing Chang'an Automobile about setting up a second venture in China to tap rapidly growing demand, people close to the deal said.
A company executive from Chang'an, which also partners with Ford, Mazda and Suzuki, had denied earlier media reports saying the joint venture would be formed after the Lunar New Year holiday, which falls on February 14. No financial details were unveiled.
Since the early 1990s, PSA Peugeot Citroën has cooperated with Dongfeng Motor, China's third-largest auto group, to make its cars under the Citroën and Peugeot nameplates.
The French carmaker has been looking for a second partner since 2004 to enhance competitiveness as it lagged behind major international rivals, including General Motors and Volkswagen, in the rapidly growing China market.
In June 2007, PSA and a smaller Chinese SUV producer, Hafei Auto, signed a memorandum of understanding to start a feasibility study on a 50/50 joint venture. Hafei Auto was merged into Chang'an last year.
"PSA has made slow progress in China, blaming limited products and an unsuccessful partnership," said Li Chunbo, an auto analyst for Citic Securities. "Having a new and strong partner would be necessary."
Last year, PSA's China sales jumped 52 percent to 272,000 cars, making China its second-largest market globally. Meanwhile, GM sold 1.83 million units and VW sold 1.4 million units in China.
Chang'an Auto Group sold 1.86 million units last year, including 820,000 of its own cars and minivans and nearly 500,000 cars under its partners' brands. It aims to sell 2.2 million units this year.
Inside Line says: PSA runs to catch up in China. — Vivian Jin, Correspondent
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