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  Carlos Tavares, PSA Peugeot Citroen CEO
PSA needs deeper cuts, crossovers and SUVs to halt China slide
Reuters | 2017/4/21

SHANGHAI  -- PSA Peugeot Citroen needs more drastic cost cuts and new  crossover and SUV  models to reverse a slump in sales in China, CEO Carlos Tavares said. 

PSA must find "a new business model" and bigger purchasing, logistics and manufacturing savings to offset falling prices, Tavares said at the Shanghai auto show on Tuesday.
His comments highlight the pressures felt by mid-market global carmakers as Chinese consumers turn to increasingly competitive offerings from domestic brands such as Geely, Guangzhou and Baojun, which is jointly owned by General Motors and SAIC. 

PSA builds Peugeots and Citroens in China with Dongfeng, which owns 13.7 percent of the French automaker, and assembles its premium DS models with another partner, Changan Automobile. 

Competition has intensified in China as rival western brands and their local manufacturing partners slash prices, Tavares told reporters. "The joint ventures panicked," he said. 

The Chinese auto market expanded 15 percent overall in 2016 and growth is expected to be slower this year. 

But PSA's sales fell 16 percent in the region last year and the decline has accelerated since. Deliveries fell by almost half in the first two months of 2017, when the Citroen brand achieved little more than one-third of its tally for the same period last year. 

Demand has also shifted from the sedans and hatchbacks that dominate most of PSA's lineup to higher-riding models, and Citroen will soon begin Chinese sales of the new C5 Aircross compact crossover, unveiled at the Shanghai show. 

"More SUVs in the Chinese market is a must," Tavares said, adding that the group needs "much more cost reductions."
But Tavares declined to give a progress report on PSA's earlier pledge to reduce China production costs by 10 percent annually. The cuts were "hard to achieve," he said.

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