Faurecia and Dongfeng agree €2bn China joint venture
French supplier Faurecia will form a new joint-venture with Dongfeng in Wuhan, targeting €2bn in deliveries to Dongfeng and its partners including Peugeot, Nissan, Honda and Kia.
French auto parts supplier Faurecia has entered into a joint-venture agreement with Dongfeng Motor Group, a major Chinese state-controlled automotive group. The new company will be based in Wuhan, the centre of Dongfeng’s operations, and aims to deliver €2 billion worth of components to Dongfeng and its automotive partners. This move is part of Faurecia’s ongoing strategy to expand its presence in China, the world’s largest car market.
Faurecia and Dongfeng Launch Joint-Venture in China
Scope of the Joint-Venture
The agreement covers deliveries not only to Dongfeng’s own brands but also to its local automotive partners, which include Peugeot, Nissan, Honda, and Kia. The joint-venture will initially focus on supplying interior and exterior modules, before expanding into seating and exhaust systems. Plans are also in place to establish a joint research and development centre at Wuhan’s automotive hub, which is expected to support further innovation and localisation of products for the Chinese market.
- Initial production of interior and exterior parts
- Future expansion into seating and exhaust systems
- Joint R&D centre planned for Wuhan
Strategic Importance for Faurecia
Faurecia, which is majority-owned by PSA Peugeot Citroën, views this partnership as a significant step in consolidating its business in China. The company’s expansion comes after a period of strong growth in the region, with Chinese sales rising by 20 percent in 2014 to €2.23 billion. The joint-venture will be consolidated in Faurecia’s accounts, reflecting its importance to the company’s global operations.
Unlike foreign carmakers, which have historically been required to form joint-ventures with local firms to access the Chinese market, international auto parts suppliers like Faurecia have faced fewer regulatory restrictions. However, by formalising its relationship with Dongfeng, Faurecia aims to secure a larger share of business with both the state-owned group and its joint-venture partners.
Market Reaction and Financial Impact
Despite the announcement of the joint-venture, investor response was muted. Faurecia’s share price slipped by 0.2 percent to €41.125, giving the company a total market value of €5.12 billion at the time of the deal. The partnership is expected to strengthen Faurecia’s standing with Dongfeng and its automotive partners, reinforcing relationships that are crucial for growth in China’s competitive market.
Future Prospects and Expansion Plans
The new business unit will begin by producing and selling interior and exterior modules, but both companies have outlined plans to diversify the product range to include seating and exhaust systems. The addition of a research and development centre is intended to drive innovation and adapt products to local market needs. This approach aligns with Faurecia’s broader efforts to increase its footprint in China and support the ambitions of its parent company, PSA Peugeot Citroën, which also has strong ties with Dongfeng.
The collaboration is set to benefit both companies by combining Faurecia’s expertise in automotive components with Dongfeng’s extensive reach in the Chinese market. As the joint-venture develops, it is expected to play a key role in supporting the growth of Dongfeng and its partners, while reinforcing Faurecia’s position as a leading supplier in the region.
