Peugeot SA share price up, to develop small-car platform with China’s Dongfeng

French car maker PSA Peugeot Citroën and Chinese partner Dongfeng Motor Corporation marked the first anniversary of their strategic partnership with the announcement that they will jointly develop a global technology platform for both companies next generation of small cars.

The two groups chairmen announced at an event in Shanghai on Sunday plans to invest €200 million in the development of a common platform for the manufacturing of B and C segment vehicles under the Peugeot, Citroen, DC and Dongfeng brands. The two auto manufacturers will also create a joint R&D centre based in Shanghai, aimed at developing products and technologies for the fast-growing Asian markets.

The tie-up between the two began in 2014 following an €800-million investment by Dongfeng in the French auto maker. The new “Common Modular Platform” will allow PSA Peugeot Citroën and DFG to manufacture vehicles in their respective growth regions, it said, adding that the common architecture will enable it to use Dongfengs supplier base and in turn meet cost reduction targets and compete regionally. Peugeot will commit with 60% of the total investment, while 40% will come from Dongfeng.

“The first partnership year was very eventful, with DFGs acquisition of an interest in PSA, the creation of new sales joint ventures for China and ASEAN countries, and DPCAs launch of the new-generation Fengshen vehicles,” said Carlos Tavares, Peugeot CEO.

While Europes second-biggest auto manufacturer continued to struggle on home turf amid anemic economic growth, sales in China soared 66% from 2012 to 734 000 cars in 2014. Sales in France last year were less than those in China for the first time in the companys history. However, Peugeots 4% market share in China still lagged well behind that of rivals like Volkswagen and Nissan. Dongfeng and Peugeot have set a goal of reaching 5% share in China by the end of the year.

“With the Common Modular Platform on stream from 2019, and with the joint R&D centre, the two Groups will put strategic resources in place to accelerate their international expansion, particularly in China and the ASEAN countries, where the goal is to sell 1.5 million vehicles by 2020,” Mr. Tavares said.

“Peugeot’s relationship with Dongfeng is a clear accelerator for growth,” said Guillaume Saint, managing director, Automotive Asia Pacific at consultancy firm TNS, cited by the Wall Street Journal. He added that the partnership between the two groups will help Peugeot catch up to European rivals that have long benefited from the Chinese car market.

Peugeot SA traded 0.79% higher at €16.58 per share at 09:54 GMT in Paris, marking a one-year jump of +50.80%. The company is valued at €12.94 billion. According to the Financial Times, the 21 analysts offering 12-month price targets for Peugeot SA have a median target of €17.00, with a high estimate of €21.50 and a low estimate of €10.50. The median estimate represents a 3.34% increase from the previous close of €16.45.