Is Chinese Dongfeng to cash in on PSA?
According to the Bloomberg press agency, the Chinese car manufacturer Dongfeng is talking to several interested parties to sell part of or all its interests in the French manufacturing group PSA.
Yesterday, the PSA share was climbing 7% higher on the stock exchange when the rumor got out, but it finally landed 0,8% lower at 19,8 euros. PSA refuses to comment on the news.
Dongfeng Motor owns 12,2% of the PSA shares. Back in 2014, when the French group was under heavy pressure, the Chinese invested in PSA. The result, after five years, is a serious added value. The interests of Dongfeng in PSA are now estimated at 2,2 billion euros.
Both companies have a long history together. For many years they have different industrial partnerships and are running co-enterprises. The most important, being DPCA (Dongfeng Peugeot-Citroën Automobile), a 50/50 joint venture importing Peugeot and Citroën in China.
China is the biggest market in the world; it was essential for the PSA group to be present over there. The financial results, however, have been far from brilliant over there, maybe that is the reason for a certain nervousness from the Chinese side.
Doing relatively well
Nevertheless, it would amaze a lot of analysts if Dongfeng would now separate itself from PSA. Last year, the PSA group published the best results in history, culminating at an operational margin of 7,7%, practically never seen for a ‘generalist’ car manufacturer.
Of course, the PSA Group is very dependent on its results in Europe, the Chinese market being fragile for the PSA brands and also South-America not doing very well. Moreover, Peugeot has lost the whole Iranian market due to the trade boycott imposed by the Trump administration.
The whole car industry is facing some problematic years shortly, with sales slumping and investments (electrification, autonomous car…) soaring. PSA seems to take the turn reasonably well, but it has its weaknesses, of course. How will the DS premium brand be doing, for example?