Under the agreement Dongfeng and the French government will each invest about €800m in return for 14% stakes. A further €1.4bn will be raised by the firm’s existing shareholders.

In response, Andrew Jackson, head of analytics at Glass's, said: ‘The news of PSA’s €3 billion tie-up with Dongfeng will be met with mixed reaction across the industry and markets. No one can doubt that with the spectre of a withdrawal of financial support from the French government, Peugeot have been caught in a very difficult position. 

‘The results from the company confirm what many analysts have feared, which is that the losses haven’t stopped. However there could be light at the end of the tunnel. The company has beaten operating loss-estimates by €70 million at €177 million and sales in January were up 7% against January 2013. 

‘Going forward Peugeot will use this cash stimulus to continue its re-structuring, though the deal is not without controversy. The Peugeot family were divided over whether to dilute their ownership of the company; many point to the fact that the sale of the Faurecia subsidiary could have been an alternative route.  However having effectively sold GEFCO to Russian Railways in 2012 the appetite to further dismantle the PSA empire will not have been particularly strong. 

‘Either way, the retention of the world’s sixth largest parts manufacturer overall and largest emissions and interior systems manufacturer is a sensible move. In terms of keeping diversity and being able to co-ordinate parts provision and technology advances, especially when considering emissions targets will only every become tougher. 

‘The injection of money into PSA will allow restructuring to continue and facilitate growth aspirations in markets such as China where PSA hope increase sales by 40% in order to sell over 800,000 cars by 2015, Latin America and Russia. This will be critical in the long-term as Peugeot has been severely exposed to the Europe downturn as a lack of model breadth and penetration into other markets has resulted in decline. Growth in sales volume are desperately needed by Peugeot who last year sold just under 1.3 million vehicles in Europe, 400,000 less than in 2012 and an eye-watering 1,000,000 vehicles less than its total registration volume in 2007. 

‘The tri-partite setup for Peugeot will be under scrutiny. The Peugeot family, in signing this agreement, have relinquished their ability to veto business decisions and will now have to forge a consensual path which satisfies the objectives of Francois Hollandes government – namely job protection – whilst also placating Dongfeng which have ambitious growth targets of their own.’

He concluded: ‘Nonetheless, integral to Peugeot’s revival will be the European new car market. Bolstered by the new 308, the signs from January are that the terminal declines have stopped for now. It will not be until H2 2014 when we will begin to see if there is a genuine recovery in progress. Until then we will have to see how this new three-way relationship develops and more importantly whether Dongfeng’s financial support will buy enough time for Peugeot to climb back into the black.’