PSA Peugeot, Changan to Co-Develop EVs, Hybrids in China

PSA Peugeot Citroen, Europe’s second-biggest carmaker, will develop alternative energy vehicles in a venture with Changan Automobile Group Co. to meet increasing demand for cars that pollute less.

The automakers will also explore jointly making hybrid and electric vehicles in China, PSA Peugeot Chief Executive Officer Philippe Varin said today in Shenzhen, China, where the Paris-based carmaker held a ground-breaking ceremony.

The European automaker may join rivals including General Motors Co. (GM), Daimler AG (DAI) and Nissan Motor Co. in planning to introduce so-called plug-in hybrid vehicles in China, where government subsidies are driving up demand. Peugeot and Changan will also start making the luxury Citroen DS 5 model in Shenzhen starting in 2013 as demand at home weakens, Varin said.

“Slow European growth means Peugeot needs to expand in China,” Varin said. “There are savings we must make in some parts of the world while we develop others.” He said savings would be made in Europe and declined to elaborate on whether the savings would include job cuts.

The French automaker, which expects to introduce the first car under its China-only brand in 2014, has said it aims to more than double its share of the world’s biggest auto market to 8 percent in 2015 from 3.4 percent in 2010.

Peugeot’s China sales rose more than 10 percent this year to more than 400,000 units, Gregoire Olivier, PSA Peugeot Citroen chief executive officer of Asian operations told reporters today in Shenzhen.

Peugeot announced plans last July to invest $1.2 billion in a 50-50 venture to produce 200,000 vehicles a year at Changan’s Shenzhen plant for Citroen and a new, shared brand.

The partnership, which would be in addition to Peugeot’s venture with Dongfeng Motor Group Co., received final Chinese government approval in July. Changan Automobile is the parent of Chongqing Changan Automobile Co., Ford Motor Co.’s partner in the country.

Peugeot will start with 16 dealers selling its DS brand in China and intends to increase the number to as many as 25 by the end of 2012, Zhanwang Ying, Changan PSA Automobile Co. executive vice president, told reporters today in Shenzhen. Changan PSA is a venture between the Peugeot and Changan.

Electric-car sales in China are forecast to exceed those in the U.S. by 2020 as the Asian nation, the world’s largest polluter, seeks to cut emissions, according to the Boston Consulting Group.

Toyota Motor Corp. (7203), Asia’s biggest carmaker, started a yearlong test of its Prius plug-in hybrid in the city of Tianjin early this year. The model isn’t being sold to consumers yet.

Electric cars may account for as much as 7 percent of total auto sales in China, the world’s largest vehicle market, by 2020, Boston Consulting said in a June 14 report. Chinese consumers are more receptive to the technology than their U.S. and European counterparts, with more than 90 percent showing interest, the report found.

Currently, buyers of energy-efficient cars in Shanghai, Shenzhen and four other Chinese cities qualify for a 60,000 yuan ($9,441) subsidy. The government aims to have 1 million electric-powered vehicles on the road by 2015, according to the Ministry of Science.

--Liza Lin. Editor: Dave McCombs, Jim McDonald

To contact the Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Chua Kong Ho at kchua6@bloomberg.net; Jim McDonald at jmcdonald8@bloomberg.net

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