Behind The Disintegration Of Peugeot Citroen In Changan: Structural Adjustment Of China'S Automobile Market

Nearly a month after the announcement of the merger of Fiat Chrysler, in November 29th, the Peugeot Citroen group (PSA) also issued a major adjustment in the Chinese market. PSA plans to sell 50% of the joint venture company owned by Changan Peugeot Citroen (hereinafter referred to as Changan PSA or CAPSA).

"DS brand will be committed to long-term development in the Chinese market and will fully serve the 75000 existing owners of the brand in China. After the change in the structure of the Peugeot Citroen CAPSA, DS brand intends to continue to produce DS cars at the Shenzhen plant. " Wang Chao, Asia Pacific Communications Director of PSA group, said in a statement.

It is understood that Changan PSA existing shareholders PSA and Chongqing Changan automobile Limited by Share Ltd, intends to sell shares in CAPSA to third parties, and plans to take over the Shenzhen factory by the third parties.

"We hope that all the staff of CAPSA can continue to stick to your posts in the current transitional period and show their dedication as always. At the same time, we sincerely invite all the staff of CAPSA to continue to serve the company after the new shareholders take over the company, just as they have dedicated CAPSA in the past. We will choose the right time to disclose to you the brand new strategy of DS brand development in China. PSA promises that DS will never quit China.

Behind the disintegration of Peugeot Citroen in Changan

It is understood that Changan PSA was founded in 2011, producing and selling DS brand high-end products in China. The joint venture invested 8 billion 400 million yuan to become the largest Sino foreign joint venture vehicle investment in China. In June 28th of next year, DS, holding the banner of the "new generation luxury car brand", held a massive listing ceremony in the 798 Art District of Beijing, and announced that its DS4 and DS5 officially entered the Chinese market.

Just entering the Chinese market, DS once ranked the top ten of China's luxury car sales. But unfortunately, since 2016, DS began a cliff style sales slump. In 2016, DS brand sales in China were 16 thousand vehicles, down 34% compared with 27 thousand in 2015.

In June 2017, Changan automobile and PSA Group signed a strategic agreement, decided to jointly invest 3 billion 600 million yuan to support DS brand, including improving the production of DS brand Shenzhen factory.

However, this increase did not allow Changan PSA to grow on schedule in the Chinese market. Data show that by 2018, Changan's PSA sales were only 3 thousand and 900, and sales in 2019 dropped further to 2 thousand in the first 9 months of 2019.

The dismal sales volume led to the continued loss of PSA in Changan. According to the financial reports of the first three quarters of Changan automobile 2013~2019, according to the equity method, Changan PSA equity income accumulated a total loss of 2 billion 455 million yuan. As Changan automobile holds 50% of PSA in Changan, the total loss of Changan PSA in the past 6 years is 4 billion 910 million yuan.

The dismal sales volume of PSA in Changan has also become the reason why both sides have sold shares.

As a matter of fact, as early as October 28th this year, another Oriental Changan automobile of PSA in Changan disclosed the information about the sale of Changan PSA50% shares in Chongqing joint stock exchange. According to the official website of Chongqing United Assets and equity exchange, in November 29th, Changan automobile formally submitted an application for transfer of listing. The transfer price was 1 billion 630 million yuan, and the end date of information disclosure was December 26, 2019.

Peugeot Citroen spokesman said: "two joint venture partners are planning to sell their shares in the joint venture. This will not change the existence and development of DS in China, and will bring forward a new strategic plan in the next few weeks or months.

In the case of their own bad condition and the overall car market down, neither PSA nor Changan automobile seems to be willing to continue to invest money in the joint venture company. On the contrary, timely stop loss is the choice of Changan automobile. In August last year, the same was due to the long-term sales slump, Changan and SUZUKI joint joint-venture relationship, SUZUKI withdrew from the Chinese market.

"It takes a long time to run a business, just like some clothes at home are useless, but we don't throw it away. So we need to integrate some inefficient or stock resources to make room for better development. In response to Changan's sale of PSA50% stake in Changan, in November 22nd, Zhu Huarong, President of Changan automobile, interviewed in twenty-first Century's economic report during the Guangzhou auto show, said that the sale of assets, the introduction of third party social resources and the change of institutional mechanisms can complement each other and revitalize resources.

"If all the two shareholders' shares are sold," Changan Peugeot Citroen Motor Co. "will not exist, because CAPSA is a joint venture between Changan automobile group and PSA group. There may be a new stock east to take over the company, and the equity will change. When the new stock takes over, the name of the company will also change, and it will no longer be called "Changan Peugeot Citroen Motor Co., Ltd.". Of course, all this is based on the smooth completion of the transaction. In November 29th, Wang Chao said in an interview with the twenty-first Century economic report reporter.

This also means that as Changan and PSA confirm the sale of shares, Changan PSA will also become the second failed project of PSA in China since 1985.

It is understood that as early as 1997, PSA's first joint venture in Guangzhou, the Peugeot motor company, went bankrupt due to poor management and accumulated a total loss of 3 billion yuan.

"Now PSA two hands (Peugeot & amp; Citroen) to support one (Shenlong) is struggling." Speaking of PSA group's sale of Changan PSA equity, senior automotive analyst Zhong Shi told reporters.

Lonely law car

In fact, in the face of structural adjustment of China's auto market, Changan PSA is not the first joint venture brand with a dismal sales volume.

Including the Dongfeng Peugeot Citroen, Dongfeng Renault and GAC Fick, a series of legal system car enterprises in the Chinese market is facing "acclimatization" phenomenon persisted.

In February this year, the sales target of 235 thousand vehicles in 2019 was set at the conference of Shenlong Automobile, which is almost half the sales target of 2018 (476 thousand vehicles). At the same time, this is the lowest sales target in the history of Shenlong Automobile. However, in October 2019, the sales volume of new cars in Shenlong Automobile was only 9730, down 47.4% compared to the same period last year, while the total sales volume in October this year was 100779, down 54.83% from the same period last year.

It was only a month away from the end of 2019, and sales were not even half as high as expected.

In 2019, Renault's situation in China was even more serious. The third quarter earnings report released by Renault group showed that Dongfeng Renault sold 606 vehicles in September, a 42.3% decline in the ring ratio, down 76.1% from the same period in September. In 1-9 months, Dongfeng Renault accumulative total sales volume was 11 thousand and 900, down 73.43% compared with the same period.

GAC Fick's Day is also not "comfortable", in September this year sales volume was only 6015, down 38.6% compared to the same period; the first three quarters of this year, the total sales volume was 52372, down 46.11% year on year.

In the eyes of the industry, DS lacks market training before entering China. In the luxury car market, Mercedes Benz, BMW, Audi and others have their own product labels, and give consumers some forward-looking experience. However, as a high-end brand in the legal system, DS's brand presence in the Chinese market has not been established.

Facing the structural adjustment of China's auto market, DS is also in a vicious circle. The worse the sale, the less sense of existence; the less sense of existence, the worse the sale.

"With the gradual reduction of the volume of the legal system, the future will gradually become a" minority "brand, or even eventually withdraw from China. But with the liberalization of the joint stock ratio, Chinese car companies can take advantage of this opportunity to integrate resources and strengthen the right to speak. The above said.

Although PSA has realized the importance of the Chinese market, it has missed the "golden period" of car market growth.

In the face of the continuous decline of China's auto market, Shenlong company also realized its own problems and accelerated the pace of strategic adjustment.

In September 4th this year, Shenlong released a "Yuan" plan for China's auto market, which will launch 14 models in the Chinese market in the next 3 years, ensuring that every brand can launch new models every year. The product will be guided by the consumers, optimize the vehicle configuration and equipment functions according to the feedback of consumers, and enhance product strength. It also said that Shenlong has already obtained the qualification of new energy production this year. After 2020, the newly listed models will launch four types of powered versions of fuel, pure electric, PHEV and micro mixing simultaneously, hoping to restore sales in six years.

Where does DS go from here?

In the face of the disintegration of PSA in Changan, the focus of the industry is on who will take the Changan PSA in the future and where to go in the future.

"At present, we do not know the specific content. Bao can only buy land and facilities, but there is no product. If there is a product qualification, then we can produce self developed cars in Shenzhen. " In response to the rumour that the industry was widely heard by Bao Nen, in November 29th, an insider close to Bao Nen told the business reporter in twenty-first Century.

However, PSA insiders told reporters: "we plan to continue to put some of the DS brand models in Shenzhen factories. Since it is publicly listed, anyone interested can go delisting. Maybe there is only one family, maybe a lot of families. We don't know who will take over now.

After the sale of CAPSA, the DS brand will continue to develop in China, and will not withdraw from China as some people say. The development of DS brand in China will be managed and operated by PSA group in the future. In the future, some of the DS models may continue to be put into production in Shenzhen factories. At the same time, we will import DS cars to domestic sales. For example, the DS brand's first pure electric SUV, DS3 CROSSBACK E-TENSE will be imported to China next year and will be sold. Wang Chao finally told reporters.

Faced with the dismal performance of DS in the Chinese market, Wang Binggang, head of the expert group of the new energy automotive innovation project, said: "enterprises are like this, technology and products are the same, and the market is the final judge."