DPCA will adjust its joint venture strategy to suspend the "two rooms and one hall" plan

According to the News on May 7, 2017, DPCA said that considering the extremely strong uncertainty this year and the economic situation, industry competition and other reasons, the company's Chinese and French shareholders will suspend the "two rooms and one hall" joint venture strategic adjustment plan that was previously rumored in the industry, and instead focus on improving brand reputation and sales, and then consider the joint venture adjustment in the future.

The so-called "two rooms and one hall" plan means that under the premise that the equity of DPCA remains unchanged at 50:50, the shareholders of China and France, namely Dongfeng Group and Stallantis Group, will respectively lead the two major brands of Citroën and Peugeot, give full play to their respective advantages and characteristics, and share public resources and fields including commodity planning, technology, quality, and industrial production, and promote the development of dual brands through internal competition.

(Source: DPCA official website)

In response to this news, the relevant person in charge of Stellantis Group, a French shareholder of DPCA, responded to the media that it would not comment, and the Chinese shareholder Dongfeng Group did not publicly respond to this.

According to public information, DPCA Automobile Co., Ltd. was established in May 1992 as a joint venture between Dongfeng Motor Group Co., Ltd. and the French PSA Group, with each party accounting for 50% of the shares, with a registered capital of 7 billion yuan. With the completion of the merger of PSA Group and FCA Group in January 2021, Stellantis Group, the world's fourth largest automotive group, became a foreign shareholder of DPCA.

With the rapid growth of China's automobile market, DPCA has developed rapidly since entering China, and reached a sales record of 710,000 vehicles in 2015. However, since 2016, the market competition has intensified, DPCA has lagged behind, and the localization of product introduction and brand marketing has not been adapted enough, gradually turning from prosperity to decline, and sales have fallen off a cliff. From 2016 to 2019, the company's sales volume fell by 15.2%, 36.85%, 32.89% and 55.17% respectively. During this period, DPCA successively released a number of internal reform and revival plans such as the medium-term business "5A Plan", "Return to the Track" Strategy, and "Yuan" Plan, and frequent personnel adjustments, but with little effect. In 2020, when the new crown pneumonia epidemic hit, Wuhan-based DPCA was severely impacted, and its annual sales fell further by 55.74% to 50,300 units, falling into a trough.

With the restructuring of Dongfeng Renault and Changan PSA and the withdrawal from the Chinese market, DPCA, which is also a French car brand, is also considered to be on the verge of delisting. In addition, in 2022, the node of the relaxation of foreign equity restrictions on car companies is approaching, and many voices believe that DPCA may follow in the footsteps of Dongfeng Yueda Kia and GAC FCA, which is absolutely controlled by TheEllantis Group.

In response to speculation that peugeot and Citroen brands may withdraw from China and Chinese and French shareholders may withdraw from the joint venture, the Chinese and French shareholders of DPCA stressed that the strategic vision of DPCA to continue to develop in the Chinese auto market and serve Chinese users has not changed; the current and long-term goals have not changed; and the confidence in DPCA's "return to the track" has not changed.

In order to revive the performance of Dongfeng Dongfeng Group and Stellantis Group in 2020, Dongfeng Group and Stellantis Group launched a new revitalization strategy and announced the necessary liquidity support for the operation of the joint venture for the long term.

In September 2020, PSA Group decided to provide 50 million euros of funds to DPCA in the fourth quarter, and Dongfeng Motor Group will also provide support for the liquidity needs of DPCA's production and operation to further protect and enrich the cash flow of DPCA. In addition, from 2020 to 2037, PSA Group will provide HUNDRED millions of yuan to DPCA every year for the brand image building and channel development of Dongfeng Peugeot and Dongfeng Citroen. The two major shareholders also decided to increase the capital of DPCA in the first quarter of 2021.

At the same time, Chen Bin, assistant to the president of Dongfeng Motor Group Co., Ltd., was appointed as the general manager and party secretary of Dongfeng Dongfeng Motor Group Co., Ltd., aiming to further strengthen the authorization of the management team of Dongfeng Dongfeng Motor Group co., LTD. and improve the efficiency of decision-making. In addition, the management level and structure within DPCA have also been adjusted to improve operational efficiency.

In October 2020, DPCA adjusted and refreshed its medium-term business plan, formed the "Yuan +" plan, and upgraded its strategic actions to "products more Chinese", "more accurate marketing", "more reliable service" and "more efficient operation". It plans to build and launch 14 new models in the next five years, implement the "Five Hearts Guardian Action" at the customer service level, and start the operation of dual-brand dealerships.

Since the launch of the "Yuan +" plan in 2020 and the listing of the localized Versailles C5 X, the recovery trend of Dongfeng Dongfeng Dongfeng Is obvious. According to the data, in 2021, DPCA produced 102,000 vehicles in the whole year, an increase of 125% year-on-year; sales of 10.05 vehicles, an increase of 100% year-on-year, to achieve a stable recovery in operation, and complete the annual sales target. It is worth mentioning that due to the shortage of chips, DPCA has purchased and airlifted parts from overseas at high prices to ensure the smooth delivery of the main model Versailles C5 X.

(Source: DPCA official website)

Entering 2022, DPCA continues to maintain a warming trend. In April 2022, DPCA delivered 9,316 units, an increase of 22.7% year-on-year, marking the 17th consecutive month of positive year-on-year growth for DPCA. From January to April, the cumulative sales volume of DPCA reached 39,632 units, an increase of 58% year-on-year. Under the impact of repeated epidemics and tight supply chains, DPCA has become one of the few joint venture brands to achieve performance recovery.

Foreign shareholder Stellantis Group released the "Dare Forward 2030" long-term strategic plan, for the Chinese market proposed to plan an "asset-light" business model to reduce fixed costs, net revenue of 20 billion euros; at the same time, it is planned to adopt a "two-room, one-room" model for the joint venture company DPCA in China, with the Chinese side leading Citroën and foreign-owned Peugeot, sharing public resources and fields including manufacturing. At the same time, as one of the upgrading plans of The Stellantis Group in the Chinese market, DPCA will also open the manufacturing field to third parties, aiming to effectively revitalize idle capacity and improve capacity utilization.

Under the shareholding structure of 50% of Chinese and foreign shareholders, the joint venture company will inevitably have problems of inefficient management, mutual blame, and serious internal friction. Zhang Zutong, member of the Standing Committee of the Party Committee of Dongfeng Motor Group Co., Ltd., deputy general manager and in charge of Dongfeng Dongfeng Dongfeng Motor Group Co., Ltd., said frankly: "Dongfeng Dongfeng has encountered difficulties in operation in recent years, and I think there are two things that can be summarized at the manager level: First, the managers sent by Dongfeng to DPCA do not fully understand PSA. Second, the managers sent by PSA to Shenlong did not fully understand the Chinese market. As a result, there are some differences of opinion in the daily management process, and these differences of opinion have caused the internal efficiency of the company to be low. ”

Some analysts believe that with the implementation of the "two rooms and one hall" plan, the Chinese and French teams are responsible for the operation of citroën and Peugeot brands respectively, forming a mechanism for internal horse racing competition, which is more conducive to giving play to the enthusiasm of all parties and avoiding serious problems of differences and frictions between the shareholders of the two parties. In addition, continuing to maintain a 50:50 share ratio will also help mobilize the enthusiasm of Dongfeng Group, provide support for the localization, electrification and intelligence of Dongfeng DPCA, and make up for the shortcomings of Stellantis Group. Therefore, compared with simply increasing the foreign equity ratio and having European shareholders lead the development of joint ventures, the "two rooms and one hall" plan is more favorable to DPCA, which is in the recovery period.

It is worth mentioning that in response to the speculation about the change in the structure of the share ratio of Dongfeng Dongfeng Group and DPCA Automobile, Dongfeng Group and DPCA motor told the media that the share ratio of DPCA Automobile will not change, and the two shareholders will still maintain a close strategic alliance relationship and work together to develop DPCA.

However, considering the complexity of the current automotive industry and economic situation, DPCA plans to suspend the implementation of the "two rooms and one hall" plan and concentrate on increasing market share. In the case of continuous intensification of market competition and the acceleration of the survival of the fittest, the annual sales of 100,000 DPCA cars are still not completely out of danger. Coupled with the structural adjustment of the automobile market, the gradual decline of fuel vehicles, the new energy transformation of Citroen and Peugeot is also uncertain. This French brand still needs to overcome many challenges to stand firm in the Chinese auto market.