PSA luxury car line drives move upmarket

PSA Peugeot Citroen, Europe's second-largest auto producer, has debuted its DS line at a Beijing auto show as part of a drive to catch up with rivals BMW and Mercedes-Benz in the world's largest car market.

The DS line, which will be produced by Changan PSA Automobiles Co., a joint venture (JV) between PSA and Changan Motor, will help the French automaker capture a larger share of the luxury car market in China, Gregoire Olivier, chief executive officer of PSA Group's Asia operations, said at the 12th Beijing International Automotive Exhibition, which opened on Monday.

"The DS line is a French-style luxury, a high-end product like LV and Chanel," he said.

The group unveiled Numero 9, a flagship under the DS brands, at the event, hoping to capitalize on rising demand for premium vehicles among wealthy buyers.

Numero 9 has an advanced hybrid system. Its engine is driven by a lithium ion battery which can be recharged in about three hours, and it is able to travel about 50 km on a full charge.

"Dealers have shown great interest in DS brands. Around 24 DS 4S stores will be put into operation by the year-end," according to the CEO.

PSA's recent drive upmarket is a departure from its usual strategy, as for years the group mainly focused on China's smaller cities by producing low- and mid-priced vehicles with Dongfeng Motor Corp.

The group's JV with Dongfeng saw sales rise more than seven percent year-on-year to 108,900 units during the first quarter of 2012.

"The Dongfeng JV makes established and mainstream cars, whereas the Changan JV will make the DS line and light commercial vehicles. We expect the Dongfeng JV to get a 5 percent market share by 2015 and the JV with Changan to hold 3 percent of the market by 2020," Olivier said.

The CEO said PSA will share new-energy technologies as well as research and development costs with Chinese partners.

PSA aims to increase its auto sales to 480,000 vehicles this year in China from 404,000 units in 2011, a target which will become increasingly tough to meet as China's slowing economy, the removal of subsidies and tighter rules on new car registration are expected to continue curtailing purchases.

The nation's auto sales grew just 2.5 percent year-on-year in 2011, down from 46 percent in 2009 and 32 percent in 2010.

Total auto sales in the first quarter dropped 3.4 percent from the previous year, with passenger car sales decreasing 1.3 percent, according to data from the China Association of Automobile Manufacturers.

"The sales slowdown will be temporary. There will be growth ahead due to rising income levels and a relatively low car ownership rate in the country," Olivier said

"The government will find ways to push the auto sector's development as the sector accounts for around 10 percent of gross domestic product."

The CEO said he is bullish on the Chinese market, as the market continues to grow and will bring lots of opportunities for the group.

The group's total revenues climbed 6.9 percent year-on-year to hit 59,912 million euros in 2011.