AutoBeta(AutoBeta.net)12/20 Report--

PSA Group (Peugeot Citroen Group) and FCA Group (Fiat Chrysler Group) two major car companies announced the merger, in order to promote the smooth completion of the merger, Dongfeng Motor Group, as the stock of PSA Group, decided to sell some of its shares and eventually owned 4.5% of the shares in the newly merged group. At this time, Dongfeng and PSA signed an agreement to expand business cooperation in China, including extending the term of the DPCA joint venture and introducing new brands and models.

China Dongfeng Motor Group and PSA Group are expanding their business cooperation, although Dongfeng Motor has reduced its stake in PSA Group to help the French carmaker merge smoothly with FCA Group, Reuters reported today.

Dongfeng said it had reached an agreement with Peugeot Citroen to extend the term of the joint venture Citroen. At the same time, under the agreement, DPCA will acquire the new brand introduced by PSA in China and will benefit from new technology and intellectual property rights.

Dongfeng also revealed that if the two sides agree to introduce the Opel brand to China, Citroen will have exclusive rights to Opel cars and the right to import auto parts from Peugeot Citroen at a lower price. "with the deepening of cooperation between Dongfeng and Peugeot Citroen, we expect the joint venture to continue to make good progress in China," said the head of Dongfeng Motor Group.

Shenlong Automobile Co., Ltd. was established on May 11, 1992, registered in Wuhan Economic and technological Development Zone, Wuhan City, Hubei Province, with Dongfeng Peugeot brand and Dongfeng Citroen brand, with a joint venture period of 35 years until May 11, 2027.

According to the latest agreement, in order to further expand the strategic partnership, the duration of the joint venture of DPCA will be extended to 2037, an increase of 10 years. At the same time, DPCA will also get the right to operate the new PSA brand in China, which, if not unexpected, is the Opel brand.

Germany's Opel was first born in 1862. In 1931, General Motors of the United States wholly acquired Opel and built it into a subsidiary of General Motors in Europe. Due to mismanagement and continued losses, on March 6, 2017, Peugeot-Citroen (PSA) and General Motors announced that they had reached an agreement to buy Opel, with PSA buying Opel for 2.2 billion euros (about $2.3 billion).

In fact, the Opel brand entered the Chinese market in 1993, introducing many models such as Yingsuya and Seavell, but due to poor sales, Opel officially suspended sales in China in January 2015, and Opel withdrew from the Chinese market.

As a result, the Opel brand is no stranger to Chinese consumers, and Opel may be an important route for DPCA's renaissance at a time when Peugeot and Citroen are not selling well.

However, the current sales volume of DPCA continues to decline, and the current situation of loss-making operation is more worthy of our attention.

Due to the poor management of DPCA, strategy and market layout, brand management and other factors, DPCA sales have declined for four consecutive years. After sales climbed to 710000 in 2015, DMC fell to 253000 in 2018, with the decline widening in 2019, with cumulative sales of only 100000 in the first 10 months of this year, down 54.8 per cent from a year earlier.

According to the performance report, DPCA's revenue fell to 7.053 billion yuan in the first half of 2019, down 60 percent from the same period last year, with an operating loss of 2.53 billion yuan. In the past 18 months, DPCA has made a cumulative loss of 6.2 billion yuan.

It was only after a serious decline in sales and continued losses in performance that DPCA realized that it was in urgent need of change. Since the second half of 2018, DPCA has carried out several rounds of overall reform of its internal institutions and departments, and senior personnel have been adjusted frequently, and all actions have to recover the lost market share. Shenlong proposed that the first thing to solve is the situation of poor cooperation between China and France in the past.

On the operational side, Dragon has launched a plan to reduce operating costs. In 2019, DMC closed a factory in Wuhan and sold its second plant in Wuhan, leaving three factories in Wuhan and Chengdu to continue production operations. At the same time, it launched layoffs to reduce the number of employees from 8000 to 5500 by the end of 2019 and to 4000 by 2020.

In order to turn losses into profits, DPCA issued a recovery plan-meta plan in September this year, hoping to achieve the goal of positive cash flow and profit as soon as possible through a series of adjustments, and plans to return to annual sales of 400000 vehicles by 2025.

PSA Group has repeatedly stated publicly that it "will not withdraw from China", the internal reform of DPCA, the extension of the term of the joint venture, and the arrival of new brands in China can be seen as PSA Group still pinning its hopes on the Chinese market and seeking to achieve renaissance in China. But what DPCA needs more is to change the status quo. On the products that consumers care about, DPCA should listen to the opinions of more real users and consumers, and make practical and effective changes, so as to improve market competitiveness.

Welcome to subscribe to the WeChat public account "Automotive Industry Focus" to get the first-hand insider information on the automotive industry and talk about things in the automotive circle. Welcome to break the news! WeChat ID autoWechat