Peugeot’s Tie-Up With Dongfeng Might Solve Some Problems But Not All image

Although PSA Peugeot Citroen and Chinese automaker Dongfeng have signed a tie-up, the French automaker still has major challenges to deal with.

The partnership between PSA Peugeot Citroen and Dongfeng will help the French car maker with the needed cash and will offer greater access to the Asian market. The signing of the deal has been overseen by French President Francois Hollande and visiting Chinese counterpart Xi Jinping. Dongfeng Motor Group and the French government will acquire matching 14% stakes in Peugeot in a $4.1 billion capital increase.

” The deal makes Peugeot a carmaker of global dimensions that can be present on all markets. This is no longer just about selling, it’s about investing together,” said President Hollande.

The partnership will help the two automakers extend their joint venture in China and increase production in an attempt to increase their market share in the world’s largest auto market, but also to export vehicles around Asia.

The new Peugeot CEO, Carlos Tavares, still has to find solutions to end losses in Latin America, become profitable in Europe, deal with the tensions in the Russian market and reach up to the ambitious China plans.

“We don’t doubt PSA’s ability to capture additional share in a Chinese premium market that is growing very strongly but caution (against) too much optimism,” Erich Hauser, of International Strategy & Investment, said in a note.