Dongfeng bets big with overseas stake

Chinese automakers made another notable overseas investment last week when Dongfeng Motor Group Co announced it would pay 800 million euros ($1.1 billion) for a 14-percent stake in PSA Peugeot Citroën. For Peugeot, Dongfeng's capital injection could help it survive a bout of increasing financial instability, while the Chinese automaker's marketing channels may also expand its sales in China. For Dongfeng, the deal means greater access to the European market and key technologies.

Yet, Dongfeng's investment is actually quite risky. The deal will see Dongfeng, the French government and the Peugeot family each hold a 14-percent stake in the company. Such a shareholding structure could lead to conflicts if the Peugeot family is unwilling to transfer core technologies to Dongfeng, while the French government certainly won't be happy to see job cuts when it comes to restructuring.

Moreover, it remains to be seen whether Peugeot can ultimately turn itself around. Due to competition in the low-end vehicle market, Peugeot suffered a loss of 5 billion euros in 2012, and General Motors sold its stake in the French company at a loss in December.