Peugeot-Citroen and its partner Dongfeng will halve their workforce, slash production capacity as China car sales plunge
- Dongfeng Peugeot Citroen Automobiles, the French carmaker’s venture with China’s third-largest automotive company, will halve their Chinese workforce to 4,000 staff by 2022, and sell two of their four factories
- Sales had been dropping for three consecutive years between 2016 and 2018
PSA Peugeot Citroen and its Chinese partner Dongfeng Group will slash their workforce and shut two production facilities in China, scaling back their capacity after sales in the world’s largest automotive market shrank for the 13th consecutive month in July.
Dongfeng Peugeot Citroen Automobiles (DPCA), the French carmaker’s venture with China’s third-largest automotive company, will halve their Chinese workforce to 4,000 staff by 2022, and sell two of their four factories, according to two industry officials with knowledge of the plans.
“It will not be an isolated case in China’s struggling auto market as overcapacity becomes a thorny issue,” said Peter Chen, a Shanghai-based engineer with US car component maker TRW. “Due to declining sales, more companies will have to cut workforce and close plants to adapt to the slowing market.”
Based in the Hubei provincial capital of Wuhan, DPCA was one among the earliest foreign automotive ventures in China, establishing their partnership in 1992. The venture assembles Peugeot’s 4008 and 5008 sports-utility vehicles, and Citroen’s C5 Aircross crossover, among other models.
Sales had been dropping for three consecutive years between 2016 and 2018. Unit sales last year were a mere one third of the carmaker’s 2014 peak, when 731,000 vehicles were sold.
Interactive Graphics: Global carmakers and their venture partners in China
The carmaker operated at 25.6 per cent capacity last year, the lowest among 17 carmakers in China, alongside Ford Motor Company’s venture with Chongqing Chang’an Automobile, according to data by Selecar.cn.
First-half sales of both Peugeot and Citroen brands plunged 60 per cent from last year to 63,027 cars.
The carmaker will start laying off workers soon, aiming to cut its combined workforce to 5,500 by the end of 2019.
Two of the three plants in Wuhan will be closed, according to sources. The Wuhan No. 2 plant will be sold, inclusive of facilities and its site, while the land parcel on the Wuhan No. 1 plant will be disposed of, after all production facilities are transferred to the No. 3 plant, they said.
“We are working with our partners to improve the overall performance of our business in China in all its dimensions,” a PSA spokesman said, according to a Reuters report on August 10.
Interactive Infographics: Made in China 2025 and China’s electric vehicles
DPCA’s scaleback may be matched by other carmakers, as Chinese car buyers are deferring their purchases of big ticket items by the slowest economic growth pace in decades, and an ongoing US-China trade war. Some buyers are ditching cars powered by internal combustion engines for electric vehicles.
The vehicle sector is one of the mainland’s biggest economic engines and accounts for one in six jobs.
It is seen as a political task for China’s local government to maintain a high employment rate to ensure social stability.
According to a document published by Liangjiang New District in Chongqing, Chang’an Ford received government subsidies worth 143.7 million yuan (US$20.35 million) last week, which was aimed to avoid massive lay-offs by the troubled carmaker.
In January-July, passenger vehicle sales on the mainland fell 12.8 per cent to 11.65 million units, according to the China Association of Automobile Manufacturers. Sales are likely to decline 5 per cent for the whole year in 2019, the association predicted.
