Citroen, a branch of French carmaker PSA Peugeot Citroen, has vowed to increase its unit sales in China by one-fifth this year, despite zero growth during the first five months because of fierce market competition.

"We have confidence in achieving our sales target of 124,000 cars in China with product upgradings and price adjustments, although sales were not good from January to May," said Claude Satinet, managing director of Citroen.

Citroen sold 104,000 cars last year in China, almost all from PSA Peugeot Citroen's joint venture with Dongfeng Motor Corp based in central China's Hubei Province.

Citroen car sales of the joint venture stood at 42,000 units during the first five months of this year, equal to the same period of last year, said Satinet.

The joint venture last Friday slashed prices of Citroen Elysee sedans by 10,000-12,000 yuan (US$1,210-1,449), following Germany's Volkswagen cutting prices of all of its own brand cars made in China by as much as 12,000 yuan (US$1,449).

This is the second price cut on the Elysee this year.

Competition on China's car market has turned red-hot with fierce price wars and dozens of new product launches every year.

Citroen was the second biggest passenger car producer in China after Volkswagen two years ago. But it was dwarfed by General Motors in 2002 and by Honda last year.

The French joint venture is also making Citroen Fukang, Picasso and Xsara, and Peugeot 307, which rolled off the assemble line in April.

However, sales of the Picasso saloon car and Xsara, which were launched in 2002 and 2003, remain sluggish with only 5,000 and 4,000 units last year respectively.

"This mainly resulted from (the high) prices of the two models due to their low local content rates," Satinet told China Daily.

The local content of the Picasso and Xsara stand at little more than 40 percent, compared with over 80 percent of the Fukang and Elysee, according to Liu Weidong, president of the joint venture.

Vowing to cut costs, Liu said the rate of any new models to be produced by the joint venture will start at 45 percent and grow to more than 60 percent in one or two years.

The joint venture will launch a glass-roof Picasso later this year, Liu said.

"The introduction of the Peugeot cars will not affect Citroen's performance in China," Satinet said.

The joint venture aims to sell 15,000 Peugeot 307 cars this year and 50,000 units next year.

The joint venture plans to introduce a Peugeot 206 compact car next year.

"Citroen's business in China will remain larger than that of Peugeot," Satinet said.

The joint venture has also set a target to sell 300,000 Citroen and Peugeot cars annually by 2007.

"China's car market will develop unstably over the next decade, sometimes quickly and sometimes slowly. We can no longer expect the annual growth of more than 70 percent seen last year, but we are still optimistic about it in the long term," Satinet said.

Sales of China-made passenger cars reached almost 2 million units last year.

But the growth during the first five months of this year stood at 37.7 percent from a year ago.

(China Daily June 25, 2004)