Peugeot's New Plant Highlights China's Booming Auto Industry

Saturation in North America and Europe leads to increased investment in China.

On Oct. 27, Peugeot Citroen kicked off construction of a massive factory in the inland Chinese city of Wuhan, symbolizing the inexorable pull of the huge Asian car market. Combined with the output of an existing plant in Wuhan, Peugeot will eventually be able to produce 450,000 autos a year.

"With this second plant we will be at a level with our group's biggest plants," said Peugeot president Jean-Martin Folz at a ceremony in Wuhan. "The development of the Chinese market is so fast that we have to prepare for the future."

Peugeot has seen sales jump from 90,000 in 2004 to 140,000 last year, and the firm is expecting the figure to further expand to 200,000 this year. As a result, 4,600 workers are toiling round the clock at Peugeot's existing plant in Wuhan to produce cars for a seemingly insatiable Chinese market.

China's passenger car sales rose 26.4% in the first nine months of the year to 3.59 million units, according to data from the Union of National Passenger Cars Market Information.

Foreign carmakers were there to reap the gains as China's increasingly affluent middle classes took to the road. For instance, Shanghai GM, General Motors' joint venture in China's largest city, saw sales shoot up 33.4% in the first nine months from a year earlier to 296,658 units.

"The markets in Europe and North America have reached saturation point," said Zhang Xin, an auto analyst with Guotai Junan Securities in Beijing. "That's why they come to China to invest."

Daimler-Chrysler opened a new factory in Beijing in September, giving the U.S.-Germany carmaker and its Chinese joint venture partner a reported initial capacity of 100,000 sedans a year. In July, Japan's Toyota Motor, the world's second largest automaker, said it would double the production capacity of its plant in south China's Guangzhou city to meet fast-growing local demand.

Copyright Agence France-Presse, 2006

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