Peugeot Citroen's 2nd Production Base Unlikely Resumed Soon

SHANGHAI - August 17, 2007: Operation of PSA Peugeot Citroen's second production-base in China, which was halted in June, is unlikely to be restarted soon, Chinese media reported today.

The project will not restart until new progress is achieved in the negotiation between PSA and its Chinese partner Harbin Hafei Automobile Industry Group Co. “Second-stage negotiations may be restarted in September,” an unnamed PSA China official told China Business News.

PSA China and HF Motor signed a memorandum of understanding to start a 50/50 joint venture in early June, but the two sides then suspended negotiations and the PSA representatives are now back for holidays, the unnamed PSA China official said.

“Details such as the form of cooperation, R&D mode and the marketing strategy won't be released until further negotiation to be restarted in September,” the unnamed official said.

According to their agreement signed in June, the cooperation will be based on the existing HF Motor’s Shenzhen plant where vehicles with fewer than ten seats will be made. However cars that the Shenzhen plant put out are so unpopular that the automaker had to suspend the production in June.

Market survey shows that, HF Saibao, the only product made by the Shenzhen plant sold only around 200 units in July.

Before partnership with HF Motors, The French automaker was among the very few international competitors which have only one joint venture in China. It set up its first joint venture, DPCA, with Dongfeng Auto Group in the 1980s.

When the production capacity of its first joint venture reached a bottleneck point, PSA decided to set up a second manufacturing venture. The feasibility evaluation took over three years before PSA gave it a green light.

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