When French automakers jumped into China, they thought Chinese consumers' appetite for French design and luxury goods would translate into booming car sales. That hasn't been the case.
After several years of growth in China, sales at PSA Group and Renault have dropped sharply. True, the slumping Chinese economy has affected sales at almost every automaker, but Renault and PSA were down 62 percent overall in the first half compared with the same period last year and hold just a 0.7 percent market share.
At PSA, group sales have slid from a high of more than 730,000 in 2014 to less than 250,000 last year, and 2019 looks to be even worse, with only 64,000 vehicles sold in the first half.
The decline at PSA has been so dizzying that the automaker is reportedly preparing to sell two of its JV plants and lay off thousands of workers. The factory it has with Dongfeng Motor is operating at 22 percent of capacity, the Financial Times reported, and its factory with Changan Automobile is nearly idled, the newspaper said.
Renault has done somewhat better, although that comes with a major qualification. Under former CEO Carlos Ghosn, the automaker had set a target of selling 550,000 vehicles in China by 2022, and sales last year rose 200 percent to 216,699.
However, all of that growth came as a result of consolidating sales from a joint venture with Brilliance China Automotive, a domestic producer of utility vehicles and minivans.
Even so, group sales are down 24 percent in the first half of this year -- and sales at the Renault-Dongfeng joint venture plunged by 73 percent through August.
But while French automakers are struggling, French luxury companies are thriving despite an overall slowdown in the Chinese economy. LVMH, which owns dozens of upscale labels including Louis Vuitton, TAG Heuer watches and Dom Perignon champagne, said it was seeing "unheard of" growth in China.
A strong performance in China -- and overseas buying by Chinese tourists -- have helped LVMH's main rival, Kering, the parent company of Gucci, Ulysse Nardin watches and Balenciaga, to double-digit growth.
Overall, exports of French fashion products to China grew by 21 percent in 2018, a French trade group said.