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Dongfeng Motor is exploring options for its stake in Peugeot-Citroen (PSA), including a possible divestment, according to media reports citing people familiar with the matter. Dongfeng owns about 12.2% of Peugeot Citroen, worth 2.2 billion euros ($2.5 billion).

Dongfeng Group has held talks with consultants in recent weeks to discuss how to liquidate some or all of its French car manufacturing trademark to PSA, according to people familiar with the matter. The company is exploring possible options for its shares, including a stake sale.

People familiar with the matter also said that Dongfeng Motor had negotiated with Peugeot Citroen when it planned to reduce its stake in order to maintain a good cooperative relationship between the two sides. Because Dongfeng Motor and Peugeot Citroen have a joint venture DPCA in China. Some analysts say Dongfeng may retain a stake in Peugeot-Citroen to benefit from future industry consolidation.

However, negotiations on the sale of shares are still at an early stage and it is uncertain whether an agreement can be reached. In addition, with regard to the report, one of the representatives of Dongfeng Motor said they did not have any information about the plan at present. Peugeot Citroen representatives declined to comment.

In May, when it was reported that Peugeot-Citroen would form an alliance with other carmakers, Peugeot-Citroen said it was open to "any opportunity" to create long-term value.

Although Dongfeng Motor, as one of the largest shareholders of Peugeot Citroen, ranks side by side with the French government and the Peugeot family. But PSA also has a partnership with Changan Automobile, which produces and sells cars under the Citroen DS brand.

In October, Carlos Tavares, chief executive of PSA, said the shareholding agreement was stable and had not yet been adjusted.

Tang Weishi also said that PSA will consider producing cars in China for the US market. It is a sign that Peugeot-Citroen is trying to keep its factories in China operating at full capacity.

Due to overcapacity, the factory capacity utilization rate of Dongfeng and Peugeot Citroen joint venture Citroen Motor is only 22%. The first plant (with a capacity of 300000 vehicles), the second plant (with a capacity of 150000 vehicles), the third plant (with a total capacity of 300000 vehicles), and the fourth plant (with a total capacity of 400000 vehicles) totaled 990000 vehicles. Factories usually need capacity utilization of more than 80% to remain stable.

In the first half of 2018, Dongfeng PSA made a net profit of 200 million yuan. However, by 2018, the annual loss will be nearly 3.7 billion yuan. After reaching a high of 704000 in 2015, the joint venture's annual delivery volume has declined steadily over the past three years. The performance in the first half of the year decreased by about 59.7% from the same period last year, resulting in a loss of 325 million euros (about 2.489 billion yuan).

In addition, Changan PSA, which produces 200000 cars a year, is also losing money, mainly because of limited sales since it was founded in 2011. According to data provided by the Federation of passengers, Changan PSA sold less than 3900 vehicles in 2018.

Philippe de Rovira, global chief financial officer of PSA, said the group was working to cut capacity at DMC, a joint venture with local partner Dongfeng Motor, possibly by renting out plant facilities.

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