PSA Praises 50% Foreign Stake Limit as China Mulls Lifting Cap

  • CEO’s support suggests unity lacking among foreign carmakers
  • Government is considering change in protectionist policy

PSA Group’s chief executive officer said he wouldn’t increase the company’s stake in its Chinese joint venture even if the 50 percent foreign ownership cap is lifted, signaling international manufacturers aren’t united in seeking the policy change.

“50-50 is very good,” CEO Carlos Tavares, 58, told reporters in Chengdu, China, where he was inaugurating a new plant with partner and shareholder Dongfeng Motor Group Ltd. “It obliges you to find an agreement with and to listen to your partner.” The maker of Peugeot and Citroen will manufacture sport utility vehicles at the plant, its seventh in the country, to tap demand in the fast-growing segment.

China’s government is considering a change in policy criticized for coddling state-owned companies and lowering incentives for local carmakers to develop leading technology and strong brands. The state-backed China Association of Automobile Manufacturers said this week the 50 percent cap on foreign ownership should remain for at least five to eight years to ensure local carmakers are ready for full-fledged competition.

The chairman of China’s National Development and Reform Commission said in June the government was looking into lifting the 50 percent cap on joint ventures, which is mandated for foreign automakers to produce vehicles in the world’s largest car market. The central Chinese government said in July it would exempt foreign manufacturers of motorcycles and batteries from ownership limits in selected free trade zones.

Chengdu Factory

PSA’s joint venture with Dongfeng also produces vehicles under the Fengshen local brand in addition to the Peugeot and Citroen marques. Dongfeng owns a 14 percent stake in the French carmaker as part of its participation in a bailout of the Paris-based company in 2014. 

The new factory in Chengdu has the capacity to produce as many as 300,000 vehicles a year. PSA is moving its Southeast Asia and China headquarters to Wuhan from Shanghai to strengthen ties with its partner, which has its headquarters and three of the companies’ joint-venture factories in the city. PSA also owns 50 percent of its joint venture with Chongqing China Changan Automobile Co. to manufacture premium DS cars.

Daimler AG said separately during a conference in Beijing on Wednesday that it remains in close cooperation with its Chinese partners and is looking into the timing and details of potential changes to the foreign ownership policy.