AutoBeta(AutoBeta.net)03/08 Report--

PSA (Peugeot-Citroen) has made a clear response to its continued dismal performance in China. Carlos Tavares, chief executive of PSA, said on Friday that after completing the merger of the two groups, PSA and FCA (Fiat Chrysler) would need to re-examine their strategy in the Chinese market. "We want to stay in China, we need to find a successful solution," according to Reuters.

The company did not disclose how successful the plan was. However, the company plans to maintain its business in China, including the DS brand, will not withdraw from China, and will be committed to the development of the Chinese market for a long time and has formulated a new strategic development plan.

At the end of 2019, PSA and FCA formally signed a binding merger agreement, which will become the fourth largest automaker in the world, and the new combined group will start operation from the end of 2020 or the beginning of 2021. The advantages of the merger are the cost savings related to technology, products and platforms, as well as the slowing demand in the global automobile market and rising electrification costs.

However, PSA and FCA also face a serious problem, their position in the Chinese market is negligible.

Dragon Motors, a joint venture between PSA and Dongfeng, has been in the doldrums in recent years, with cumulative sales of just 113579 vehicles in 2019, down 55 per cent from a year earlier. While another joint venture company, Changan PSA, has been disbanded due to various unfavorable factors, and the DS brand model will continue to be produced at its Shenzhen factory after it left the joint venture in China. PSA Group reported losses and writedowns totaling 700 million euros (about 5.355 billion yuan) in China in 2019.

By contrast, PSA Group's global profit margin hit a record high in 2019. In 2019, the group's overall revenue reached 74.731 billion euros, up 1.0% from 2018; consolidated net profit reached 3.584 billion euros, an increase of 289 million euros compared with 2018; and net profit belonging to the parent company reached a record 3.2 billion euros, an increase of 13.2% over the same period last year. PSA Group said this was mainly due to a strong product portfolio and further cost-cutting. In 2019, PSA Group's global sales were 3.5 million vehicles, down 9.4% from the same period last year.

Sales in China and Southeast Asia fell 55 per cent year-on-year to 117000 vehicles, accounting for only 3.34 per cent of PSA Group.

Even with the merger of FCA's operations in China, the new group is still disappointing in China.

In 2019, FCA Group shipped only 149000 new cars in Asia, down 29% from a year earlier. Among them, the joint venture Guangzhou Auto Fick sold 74000 units for the whole year, down 41 per cent from the same period last year. As a result, FCA lost $39.6 million (274 million yuan) in Asia in 2019.

Cui Dongshu, secretary-general of the China Federation of passengers, said, "the reason for the poor performance of the two automakers is their management and competitiveness. I do not see the potential for them to integrate their operations in China." there will not be much synergy between the two in procurement and product lines.

PSA Group has five major automotive brands, namely Peugeot, Citroen, DS, Opel and Vauxhall; FCA Group includes Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Maserati and other brands.

The business of PSA and FCA has gone backwards in China, and even the merger does not give Chinese consumers much to look forward to. For PSA, they still say the same thing, stay in the Chinese market and seek sustainable development.

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