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Auto JV Expects Quarter Increase in 2007
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Sino-French joint car making venture Dongfeng Peugeot Citroen expects a one-quarter increase in its 2007 sales, helped by the introduction of new models and the rapid growth of the car market in China.


The company, held by French carmaker PSA Peugeot Citroen and China's Dongfeng Motor, aims to sell 250,000 vehicles next year, up from 200,000 units anticipated this year, Liu Weidong, president of the venture, said yesterday in Beijing, as the company unveiled its Citroen C2 subcompact.


Liu said Dongfeng Peugeot Citroen will introduce three new models in 2007 as part of its plan to launch 11 new products between 2006 and 2009.


In the first three quarters of this year, the venture's sales volume jumped by more than 35 percent to 145,000 cars, of which three-fifths came from the Citroen brand, he said.


Based in Central China's Hubei Province, the company sold 140,000 vehicles last year.


It is expanding the production capacity of an existing plant and will begin building a new factory later this year, he said.


The company will have an annual manufacturing capacity of 450,000 vehicles by 2010.


"China's booming car market also provides great opportunities for us (to expand)," said Liu.


Demand for passenger cars in China is forecast to exceed 4 million units this year, up from 3.2 million in 2005.


In the first eight months of 2006, sales of domestically-made cars grew by 32 percent year-on-year to 3.2 million units, according to industry data.


The Citroen C2, equipped with a 1.4 or 1.6-litre engine, is the firm's third new model launched this year after the Citroen Triomphe and Peugeot 206.


The fashionably styled car will retail for between 77,800 yuan (US$9,850) and 106,800 yuan (US$13,520).


Executives expect to sell 5,000 C2s this year, and at least 30,000 annually in coming years.


Liu said the C2 shares 85 to 90 percent of its parts with the Peugeot 206, enabling the company to cut costs and offer the car at a competitive price.


The joint venture, formed in 1992, also produces the Citroen Fukang, Elysee, Picasso and Xsara, as well as the Peugeot 307.


Its planned new plant will start to assemble large-sized Citroen and Peugeot sedans in 2009 with an annual production capacity of 150,000 units.


Liu reiterated yesterday that Dongfeng Peugeot Citroen will become profitable this year as a result of brisk sales and cost-cutting efforts, after posting losses over the past two consecutive years.


According to PSA Peugeot Citroen's Interim result report, revealed in July, the venture had first-half operating profits of 50 million euros (US$64 million), they are expected to reach 100 million euros (US$128 million) for the whole of 2006.


Liu said the venture now has a profit margin of 5 to 6 percent, which is "a normal level."


"Although car sales are growing rapidly, we still face great pressures from price cuts in the domestic car market and mounting costs for materials such as metals," he said.


At the beginning of 2006, Liu announced that the venture plans to slash costs by 1 billion yuan (US$126 million) this year from last year by using more locally-made spare parts and improving management.


(China Daily October 12, 2006)


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