Peugeot SA’s share price up, to build a fourth factory in China in collaboration with Dongfeng Motor Corp.

The second-biggest car manufacturer on the territory of Europe – Peugeot SA, made an official statement today that it has decided to build a vehicle factory in China due to increasing demand in the country. This would be the fourth car factory of Peugeot in China, which is to be operated in collaboration with the companys local partner Dongfeng Motor Corp.

According to Peugeot SAs statement, the new factory is to manufacture SUVs and other large vehicles under the brands of Peugeot, Citroen and Fengshen.

The company also seeks to increase its production in China by one third in order to consolidate its positions in the highly-competitive auto market in the country. According to the companys statement, the new factory, which is to be located in Chengdu in the province of Sichuan, will have a capacity of producing 300 000 sport-utility and multipurpose vehicles on an annual basis. The manufacturing is planned to start “in late 2016”. Peugeot SA also explained that the new factory is expected to increase the companys joint capacity to 1 million cars per year.

After turning to Dongfeng Motor Corp. for a bailout in February 2014, Peugeot SA has pursued its growth in Asia. At present, Chinese car market is the largest worldwide, which makes it extremely competitive. The auto market in the region expanded by 11% over the first five months of this year. Moreover, the deliveries by the joint venture between Peugeot and Dongfeng increased by 18%.

As reported by the Financial Times, investment bank Exane BNP Paribas wrote in a note: “We believe China could make up [around] 60 per cent of PSAs pre-tax profit in 2016.”

Peugeot SA added 0.58% to trade at 11.19 euros per share in Paris, marking a one-year increase of 125.96%. According to data published by the Financial Times, the 22 analysts offering 12-month price targets for Peugeot SA have a median target of 9.80, with a high estimate of 13.00 and a low estimate of 4.55. The median estimate represents a -11.91% decrease from the last price of 11.13.