Despite a market share below their international level, French car makers (PSA Peugeot Citroën and the Renault-Nissan Alliance) have improved their performance strongly in the Chinese market in recent months, which grew by 12.3% during the first 6 months of 2014. PSA Peugeot Citroën sales have increased by 28% in comparison to last year and Renault sales have risen by 44%.

Renault signed an agreement with Dongfeng Motors in December 2013 to form the Dongfeng Renault Automotive Company (DRAC). The joint venture is not due to become active until 2016, when the new plant, built under the agreement, will start producing vehicles. The plant will have an initial capacity of 150,000 vehicles per year, with the potential to double the output in the near future. Initially, the plant will produce a new range of Renault crossover vehicles.

This late development is also designed to strengthen Nissan’s position in the Chinese market, where 1.27 million Nissan brand vehicles were sold in 2013. With a target of 2 million vehicles, the alliance between Renault and Nissan shows how the synergies between both car makers can be fruitful. While there is competition between the two in the main market, which Renault is willing to address, its experience with electrical vehicles is very valuable to Dongfeng because of the concern in China over environmental issues, particularly air quality in China’s large cities.

The story of PSA Peugeot Citroën in China is much older. It first started in the 1980s, but really grew when Citroën formed its joint venture (DCAC) with DongFeng in Wuhan. Since then the agreement has been enlarged to include a joint venture (DPCA) between Peugeot and DongFeng in 2002. While creating a specific direction for China in 2007 and creating its first R&D and design centre outside Europe in 2008, a new step took place when DongFeng became a shareholder of PSA last year with the same holding as PSA Peugeot Citroën and the French State.

This will certainly create an intensive but also challenging relationship for the future.

More recently, in October, DPCA began work on its fourth plant, in Chengdu, designed to support growing sales in China. This plant will have a total capacity of 360,000 vehicles a year, once in full production. It will produce Dongfeng Citroën, Dongfeng Peugeot and Dongfeng Fengsheng-badged vehicles, mainly for the SUV and MPV segments. The first cars are due to roll off the production line in late 2016.

This plant will be in addition to three others in Wuhan, currently giving total production capacity of 750,000 vehicles per year. The Chengdu plant will raise this to over 1m units per year, in line with PSA’s “Back in the Race” Plan to sell 1m vehicles in China in 2017.

Both French makers have been successful with the new product ranges they have brought to the market, taking into account the interest in the newest technology that exists in the Chinese market. Another factor that should be considered, is that consumers have been bringing forward their purchases, over concerns that their local city government may cap the growth in vehicle ownership to address the air quality issues that China faces.

All these brand new successes have to be confirmed. The next plants to be built for PSA and Renault are both encouraging and ambitious projects. In addition, the used car market will become a key factor for the success of Renault and PSA in the Chinese market.

In the used car market, the brands can prove if their desirability is strong enough to be successful in a more and more competitive future market environment. Moreover, the dealer network will need the used car business to stay profitable in the long run and continue to be a reliable sales partner to the French brands. And of course, the increasing role of financial services will, eventually, clearly underline the importance of competitive residual value performance as the key factor for a sustainable success.