The first Peugeot 307 sedan rolled off the assemble line yesterday at PSA Peugeot Citroen's joint venture (JV) with China's Dongfeng Motor Corp in Wuhan, capital of Central China's Hubei Province.

It comes seven years after Peugeot sold its loss-making JV plant in Guangzhou, capital of South China's Guangdong Province, to Japan's Honda Motor Co.

It is the first time Peugeot has launched one of its latest models outside of France, according to Peugeot Chief Executive Officer Frederic Saint-Geours.

"We have learned the lesson from the failure of our operation in Guangdong that we have to co-operate with a big Chinese automaker to produce our latest products and build perfect sales and service networks, if we want to be successful in China," Geours said.

Peugeot's venture with Guangzhou Automobile Group, a smaller Chinese automaker compared with the State-run Dongfeng, produced the outdated Peugeot 505 pickup.

The JV between PSA and Dongfeng aims to sell 15,000 Peugeot 307 sedans this year. It is aiming for sales of 50,000 units next year.

"We plan to sell 100,000 Peugeot cars in China annually in 2006," Geours said.

The JV is also set to produce the Peugeot 206 hatchback next year.

The introduction of Peugeot cars is part of an agreement clinched in 2002 between PSA and Dongfeng to sink a further 600 million euros (US$714 million) into the JV by 2006.

The venture, which now produces Citroen's Fukang, Elysee, Xsara and Picasso, wants to increase its annual sales to 300,000 units in 2006 from last year's 100,000 units.

It plans to introduce at least one Peugeot and Citroen model per year from 2004 to 2009.

The local content rate of the 1.6 and 2.0-litre Peugeot 307 stands at 45 per cent. It will rise to 50 per cent next year and 60 per cent in 2006.

Some 80 dealers will start offering Peugeot 307 sedans to consumers in August.

"We believe we will be successful in China starting from the Peugeot 307," Geours said.

Sources from Peugeot say the company is aiming to control 5 per cent of China's passenger car market in the long term.

"However, it is hard to say what sort of success Peugeot will have in China, although it has started to introduce its latest models," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

"The Peugeot 307 will be competing in the most fierce segment in China's auto market, which will only intensify as more models are released."

The Peugeot 307 has many strong rivals in China, such as Volkswagen's Bora, the Excelle of General Motors and Toyota's Corolla.

"Pricing will be a very important factor for the success of the Peugeot 307," Zhang said.

Its price will be revealed at the end of May, according to Tang Teng, a Peugeot commercial manager in China.

Honda's JV with Guangzhou Automobile Group, which now produces the Accord, Fit and Odyssey, is pushing to produce 150,000 vehicles this year, up from 117,000 units in 2003.

Sales of Chinese-made passenger cars surged by 75 per cent to almost 2 million units last year.

Source: China Daily