After its recent purchase of the Opel and Vauxhall brands, French car manufacturer PSA Group, which is partially owned by Chinese automaker Dongfeng Motor Co, is now under intense pressure due to its lackluster performance in the world.
PSA's revenue fell 1.2 percent last year to 37 billion euros (.36 billion) from 37.5 billion euros in 2015 globally.
Industry analysts have warned that PSA's purchase of Opel is likely to be anything but an instant cure for the company's woes in China.
“As a new brand, it's a tough job for Opel to beat SAIC GM in China,” said Shu Chang, principal at German firm Roland Berger Strategy Consultants' Shanghai office.
“If Opel is introduced into the Chinese market, it will take some time for the brand to become established. It will need to learn to compete in the local market, strengthen its marketing, establish sales channels and localize research and development,” said Shu.
PSA announced last week the purchase of General Motor's Opel and Vauxhall brands for 1.3 billion euros (.4 billion).
PSA said in a statement it was also buying GM Europe's financial operations for 900 million euros in a joint deal with bank BNP Paribas.
With GM's Opel and Vauxhall operations, PSA would become Europe's second-largest carmaker behind Volkswagen.
SAIC General Motors has sold the Buick Regal, Excelle GT, Verano, and Chevrolet Malibu models in China and has managed to consolidate its market share. Opel's models are on the exactly same platforms, with slight difference in tuning and configurations.
A senior analyst at a securities firm, who spoke on condition of anonymity, said: “PSA and Dongfeng Motor are simply continuing to roll the dice on this, however Opel won't help PSA in China because the domestic market for international brands is already saturated.”
The analyst added that Peugeot and Citroen were competing with similar products on the same platforms, and battling with other joint ventures under the umbrella of China's second-largest auto making giant, Dongfeng Motor Group.
Dongfeng Peugeot Citroen Automobile and Dongfeng Peugeot Citroen Automobile Sales, both based in Hubei province, made a combined profit of 3.6 billion yuan (2 million) in 2016, 27.3 percent less than in the previous year.
Dongfeng Motor acquired a 14 percent stake in PSA for 800 million euros (4 million) in 2014, and became one of the three main shareholders in the group, along with the Peugeot family and the French government.
Zhou Liqin, media manager at Dongfeng Peugeot Citroen Automobile, said the two brands were carefully positioned and differentiated in the market and the joint ventures under Dongfeng Motor are sister companies generating “great synergy”.
“The two brands are focusing on different demographics and are targeted at varied segments. The customers might not perceive the differences, but they certainly exist. For example, the Peugeot brand strengthened its presence in the sport utility vehicle segment in 2016,” Zhou said.
She continued: “We are trying to expand the lineups of both brands this year to every segment from 100,000 yuan to 250,000 yuan, and both brands are going to be well balanced,” Zhou continued.
A staff member at Dongfeng Peugeot Citroen said the carmaker gave more incentives to sell Peugeot models than Citroen ones last year, which led to salespeople making exaggerated efforts to promote the Peugeot brand. This included attempts to turn potential Citroen customers into Peugeot buyers.
Local media cited a Dongfeng Peugeot Citroen employee as saying that about 1,000 workers were transferred from the plant to Dongfeng Honda Automobile, and attributed the switch to the Peugeot Citroen plant's low sales volume.
Zhou said the transferred employees are a team of nearly 700 line workers and supervisors to support the Donfeng Honda plant, because Dongfeng Peugeot Citroen has reserved a certain capacity and number of personnel in preparation for expected growth.
“We will have substantial development in the Chinese market this year. After the adjustment made last year, we are now, through increased focus on marketing, working to realize growth as soon as possible,” Zhou added.
Roland Berger's Shu recommended heavier emphasis on branding as well as a rapid expansion of the company's compact and SUV line-ups.
He added: “The French brands do not have a clearly defined image as far as Chinese consumers are concerned.” By contrast, German brands are synonymous with technological advancement, Japanese brands are perceived as economical and US ones are known for their size and balanced characteristics.
“PSA has a lack of new products in the compact and SUV segments, which are the most popular segment in China.”