Peugeot China boom may herald industry change

French carmaker PSA Peugeot Citroen's 2014 sales rose 4.3 percent thanks to a 32 percent jump in deliveries in China in a sign that mass market producers were outperforming premium brands in the country.

PSA said China became its largest market, reaching 734,000 vehicles in 2014, thanks to the addition of 100 dealership networks, and as customers snapped up mid-size crossover vehicles like the Peugeot 3008.

China is a key part of PSA CEO Carlos Tavares' turnaround plan after the French state and China's Dongfeng each took 14 percent stakes in the Paris-based company as part of a 3 billion euro ($3.8 billion) bailout in 2014.

Car sales in China, which is the world's largest car market, slowed to 6.9 percent in the past year from a 14 percent growth the year before.

However, PSA figures published on Wednesday show mass carmakers may be taking less of a hit than premium brands like BMW, which faces demands for rebates from dealers unhappy with the level of inventory.

Peugeot-branded car sales rose 43.1 percent in China in 2104 to 386,565 cars. BMW sales in the Chinese mainland grew by 16.7 percent last year, with a total of 455,979 BMW and Mini vehicles delivered to customers.

"We prefer mass over premium exposure in China in 2015," Stuart Pearson, an autos analyst at Exane BNP Paribas said, in a note on Wednesday.

"While growth in financial services should support the overall market, we fear that the 1 million plus units of new premium capacity added over 2014-15 will continue to pile pressure on pricing."

For the industry as a whole, the slowdown in sales was most marked in the fourth quarter, but PSA China sales are estimated to have been up 28 percent in that period, Pearson said.