(Adds comments, details, background)
SHANGHAI, April 18 (Reuters) - PSA Group, the
maker of Peugeot, Citroen and DS cars, needs more drastic cost
cuts and new SUVs to reverse a slump in sales in China, Chief
Executive Carlos Tavares said on Tuesday.
The Paris-based group must find "a new business model" and
bigger purchasing, logistics and manufacturing savings to offset
falling prices, Tavares said at the Shanghai auto show.
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, jointly owned by
General Motors and SAIC.
The French carmaker builds Peugeots and Citroens in China
with 13.7 percent shareholder Dongfeng and assembles
its premium DS models with another partner, Changan Automobile.
Shares in PSA, which agreed last month to acquire rival Opel
from GM, were down 2 percent at 17.22 euros at 1200 GMT, while
the Stoxx Europe 600 autos index was down 1.1 percent.
Competition has intensified in China as rival western brands
and their local manufacturing partners slash prices, Tavares
told reporters. "The joint ventures panicked."
The Chinese auto market expanded 15 percent overall in 2016,
and growth is expected to be slower but positive this year.
But PSA's sales fell 16 percent in the region last year and
the decline has accelerated since. Deliveries were down 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 saloons and hatchbacks that
account for most of PSA's line-up to higher-riding models and
Citroen will soon begin Chinese sales of the new C5 Aircross
compact SUV, 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.
(Reporting by Joseph White; Writing by Laurence Frost; Editing
by David Evans, Greg Mahlich)