Chinese automaker Dongfeng and the French government are each investing USD 1.1 billion in Peugeot, throwing a financial lifeline to the struggling French auto brand and possibly expanding its global presence.
Plans call for Dongfeng Motor Co., the French government and the Peugeot family each to own equal shares in PSA Peugeot Citroen and to have equal voting rights, Dongfeng said in a statement today.
The deal reflects an increasingly popular strategy among Chinese companies, which are buying stakes in established foreign brands to improve their competitive edge in their fast-growing home market.
China's auto market is the world's biggest by number of vehicles sold but is crowded and competitive, with every global brand and two dozen indigenous automakers jostling for sales.
Dongfeng said the French government is expected to buy the same number of shares as it on the same terms. That would bring Peugeot at least USD 2.2 billion, less than the USD 4.1 billion it said earlier it hoped to raise.
Dongfeng said it and Peugeot will expand cooperation in technology, research and development, manufacturing and overseas distribution. It said the two sides will sign a formal agreement in March and continue work on their strategic partnership.
Today's brief announcement gave no additional details, including about how the owners will manage a potentially unwieldy structure with ties to both the French and Chinese governments.
While it is clear Peugeot gains much-needed capital, "from the Dongfeng side, the objective still is a little bit vague," said industry analyst Yale Zhang of AutoForesight in Shanghai. "We don't know if there are clear terms about transfer of technology for platforms or power trains. They still need to clarify their objectives."
Global automakers that want government permission to manufacture in China are required to work through local partners. Such ventures usually focus on China's domestic market and avoid exports that would compete with the global brands' operations abroad. The only major exception is a venture by GM and its main Chinese partner in India to sell cars developed in China.
