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Peugeot Targets China Fashionistas in Quest for 10% Luxury Share

Peugeot Plant In China
A worker prepares to paint a vehicle in the paint shop of a plant operated by Dongfeng Peugeot-Citroen Automobile Ltd. in Wuhan, China. Peugeot is undergoing a reorganization that brings in Chinese manufacturing partner Dongfeng Motor Corp. and the French state as strategic investors alongside the Peugeot family. Photographer: Tomohiro Ohsumi/Bloomberg

March 26 (Bloomberg) -- PSA Peugeot Citroen, the unprofitable French automaker, said it’s seeking to capture 10 percent of China’s luxury vehicle sales by promoting its DS brand to people in fashion and design.

The Paris-based company, which started manufacturing DS vehicles in China in September, is targeting to sell 200,000 DS vehicles in four years, after delivering about 3,500 units in 2013, according to Arnaud Ribault, DS China’s general manager. By comparison, Daimler AG’s Mercedes-Benz took five years to reach the same level of sales after starting local production.

“We have a lot of designers, people working in fashion” as customers, Ribault said in an interview this week at the brand’s main Shanghai showroom. “Someone who is buying an Audi A6, I think will never buy a DS5.”

Peugeot is working on building DS into a full-fledged brand that could help its return to profitability and compete in a market dominated by Volkswagen AG’s Audi and Bayerische Motoren Werke AG’s BMW. Incoming Peugeot Chief Executive Officer Carlos Tavares said it may take two decades before DS is ready to take on the German premium brands.

A sponsor of Shanghai Fashion Week for the past four seasons, Peugeot is seeking to carve a niche for its DS line in China, which McKinsey & Co. has projected to overtake the U.S. as the world’s largest luxury vehicle market by 2016. Automakers from General Motors Co.’s Cadillac to Nissan Motor Co.’s Infiniti have also announced plans to expand in the world’s second-largest economy.

Sales Target

The company plans to double its number of DS dealers to 100 by the end of this year, according to Ribault.

Audi, BMW and Mercedes-Benz collectively account for more than 70 percent of China’s premium auto market, according to researcher IHS Automotive.

Peugeot is undergoing a reorganization that brings in Chinese manufacturing partner Dongfeng Motor Corp. and the French state as strategic investors alongside the Peugeot family.

The company builds the DS line of cars with another partner, China Chang’An Automobile Group, in Shenzhen, where they invested 9 billion yuan ($1.5 billion) in a plant with an annual capacity to produce 200,000 vehicles.

New Model

Peugeot will start sales of the DS 5LS compact sedan in Beijing on March 28, the second model it’s producing in the country. A sport utility vehicle is being planned for sale in the fourth quarter of this year.

At 149,900 yuan for the starting pre-launch price, the DS 5LS is cheaper than Audi’s A3, which begins at 199,900 yuan, according to the companies.

DS will also appeal to a new generation of premium customers who are “younger, more independent and more tasteful,” Ribault said. These buyers may be entrepreneurs or middle to senior management and in the 30-to-35 age group, he said.

The automaker appointed French actress Sophie Marceau as the spokeswoman for the DS line last year, and has also featured Chinese actress Sun Li, famous in China for her role as an imperial concubine in a period drama.

The company is also advertising in online video sites in China such as the one operated by Youku Tudou Inc., which streams the Emmy Award-winning U.S. series “House of Cards,” according to Ribault.

“The premium market is growing in China and will go on growing,” he said. “We have to fight the competitors.”

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Chua Kong Ho

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