PSA-Dongfeng's fourth China plant receives approval

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PARIS (Reuters) -- PSA/Peugeot-Citroen has signed an agreement with local authorities in China to proceed with the construction of a fourth factory with partner Dongfeng Motor Group, the French carmaker said today.

Work will start later this year on the plant in Chengdu, central China, which will begin production of SUVs and minivans in 2016 with an eventual annual capacity of 300,000 vehicles, PSA said in a statement.

The joint venture currently operates three plants in Wuhan, which have a total potential capacity of 750,000 units a year. With the fourth plant, production capacity will be lifted to 1 million units a year in 2016, PSA said.

PSA struck a deal in February to sell matching 14.1 percent stakes to the French government and Dongfeng as part of a 3 billion euro ($4.1 billion) capital increase for the money-losing French carmaker.

The bailout also expanded the existing PSA-Dongfeng joint venture with a 1.5 million vehicle sales goal for 2020 - including some exports to Southeast Asia.

PSA sold 557,000 vehicles in China last year and is targeting at least 700,000 combined sales this year through DPCA and a second joint venture with Changan Automobile Group, which manufactures cars for its premium DS brand.

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To support the strong growth in its unit sales, DPCA signed on 2nd July an agreement with the city of Chengdu for the construction of its fourth production facility in China. Work will get underway in the second half of the year, with the first car scheduled to roll off the new assembly lines in late 2016. With total capacity eventually reaching 300,000 vehicles a year, DPCA’s fourth plant will build Dongfeng Citroen and Dongfeng Peugeot and Fengshen-badged SUVs and MPVs. DPCA’s current production base comprises three plants in Wuhan, which are running on two shifts for a total potential capacity of 750,000 units a year.

With the fourth plant, production capacity will be lifted to one million units a year in 2016. The company’s full-year objective for 2014 is to sell more than 650,000 vehicles in China. Last 28 March, Dongfeng and PSA/Peugeot-Citroen signed a global strategic partnership with the objective of selling 1.5 million vehicles by 2020.

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