April 20 (Bloomberg) -- PSA Peugeot Citroen, Europe’s second-largest carmaker, raised its sales target in China by 11 percent after demand rose more than expected in the first quarter, providing welcome relief to woes in its home region.
The French carmaker plans to deliver 557,000 cars this year, up from its previous target of 500,000 because of robust demand for the Peugeot 3008 crossover and Citroen C4L sedan, Gregoire Olivier, the head of the company’s Asian operations, said in an interview today at the Shanghai Motor Show.
The new 2013 sales target would give Peugeot a market share of about 4 percent in China. That would put the company on track to reach its goal of grabbing 5 percent of car deliveries in the world’s largest auto market by 2015 as it seeks to catch up with competitors.
“I’m very confident that we will reach our target” in two years, said Olivier. “We’re well in line with our plan” on sales and profitability per car is rising as well.
General Motors Co. and Volkswagen AG, the world’s second-and third-biggest carmakers, are the top sellers in China, while Paris-based Peugeot grasps for a foothold with market share in the country at just 3.5 percent last year. Growth in China is crucial to Peugeot’s efforts to revive profit as the European car market slumps to a 20-year low.
Peugeot is “not as late as Fiat and Renault but still, compared to GM and Volkswagen, they’re very late” in targeting China, Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG, said by phone. Based on Peugeot’s deliveries in the country this year, “they’re actually quite strong, with very good volume development in the first quarter.”
The French manufacturer’s deliveries in China soared 31 percent to 142,000 vehicles in the first three months of 2013, the automaker said on April 19, estimating that it accounted for 3.95 percent of the market. VW and GM had respective shares of 16 percent and 8 percent in February, according to LMC Automotive estimates.
“In markets such as this one, you need to have at least an 8 percent share to generate some cash,” said Florent Couvreur, an analyst at CM-CIC Securities who recommends selling Peugeot shares. Peugeot is growing “at about the same pace as Volkswagen this year, and this is perhaps the only market in the world where they’re growing faster than the market itself.”
The manufacturer is displaying the Peugeot 301 budget model and Citroen C-Elysee sedan at the Shanghai show, which concludes April 29. Sales of the models in China are scheduled to start in the second half of this year.
“The C-Elysee and 301 seem to me to be excellent products to gain market share” in a competition with models such as Volkswagen’s Jetta and Ford Motor Co.’s Focus, Couvreur said.
Burdened by Europe’s slowdown, the French company reported a loss before interest, taxes and one-time gains or costs of 576 million euros ($752 million) in 2012, its first deficit in three years, versus earnings of 1.09 billion euros in 2011.
Chief Executive Officer Philippe Varin laid out a strategy in February for Peugeot to deliver 50 percent of its vehicles outside Europe by 2015. Peugeot made 62 percent of its deliveries and generated 68 percent of revenue in Europe last year. Group sales in China rose 9.2 percent to 442,000 cars and commercial vans, reaching 16 percent of the French company’s global total, led by the Peugeot brand.
The state-backed China Association of Automobile Manufacturers is forecasting that car sales this year will rise 8.5 percent to 16.8 million vehicles. To tap that growth, Peugeot plans to add an average of 100 dealerships a year in the country, split roughly equally between its two brands. Peugeot currently has about 360 stores and Citroen around 410, Olivier said.
Citroen’s upscale DS line will operate as a stand-alone premium brand in China in a bid to benefit from growing demand for luxury cars in the country, he said.
Olivier, a 52-year-old engineer who graduated at the top of his class at France’s elite Polytechnique engineering school in 1979, has been a member of Peugeot’s management board since 2007. A former executive at plane-engine and mobile-phone producer Safran SA and former CEO of Peugeot’s 57 percent-owned Faurecia car-parts operation, Olivier has led the automaker’s Asian operations since 2010.
Peugeot currently builds cars at two plants in Hubei, China, in a joint venture set up in in 1992 with Dongfeng Motor Co., the country’s biggest automaker. A third plant in that city is scheduled to be completed by the end of this year, allowing the partnership to increase capacity to 750,000 by 2015 from 450,000 in 2010.
The French company signed a second venture agreement in 2011 with Changan Automobile Group Co., with the aim to produce 200,000 vehicles a year at the Chinese partner’s plant in Shenzhen. The venture, called CAPSA, will start building the DS5 premium compact car in the second half of 2013.
Peugeot investment in Chinese activities since 2010 total about 19.4 billion yuan ($3.14 billion), spokesman Jean-Baptiste Mounier said.
“They bet a lot on China, and that’s understandable,” CIC analyst Couvreur said. “The only issue is that the dividends they’ve got so far from their operations are less than 100 million euros, which hardly helps.”
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