The joint venture between Chang’an Automobile Group and PSA Peugeot Citroen broke ground on its facility on November 20 in Shenzhen, Guangdong province. It has CNY8.4 billion in initial funding through equal investment by both partners. The joint venture plans to have an initial output of 200,000 vehicles and the same number of engines when operations start in mid-2013. A CNY500 million research and development (R&D) center will also be built. Vehicles produced at the joint venture will carry the Peugeot, Citroen and Chang’an brand, as well as a new marque created for the domestic market. Before local production begins, the venture will first import high-end Citroen DS series models to China next year. First to arrive will be the DS5 and DS4 in the first half of the year, followed by the DS3 in the later half. Plans call for the joint venture to open 20 to 25 dealer outlets by the end of next year and then further expand to more than 200 by 2015. PSA Peugeot Citroen’s Chief Executive Philippe Varin said that the company has plans to sell a gasoline-electric hybrid DS5 in China, but did not give a timetable. The French carmaker has an existing joint venture with Dongfeng Motor Corp that produces mostly compact cars. Peugeot Citroen sold only 370,000 vehicles in China last year, a 3.3% share of the overall market. The company said earlier this year that its goal is to have an 8% share by 2015, the China Daily reports.

Car dealer Baoxin Auto is seeking HKD3.2 billion to HKD4.1 billion in an initial public offering (IPO) in Hong Kong to help expand its network of dealerships, which centers on luxury car brands such as BMW, Jaguar Land Rover and Audi. Car dealers face rising competition, industry consolidation and a sales slowdown, which means they must also work to offset rising inventory levels via discounting. “Many are going public to raise funds in order to keep growing,” says Yale Zhang, Managing Director of Shanghai-based consultancy Automotive Foresight. “The dealer business is not as profitable as 10 years ago but the required investment keeps rising. Many smaller operators are shutting down, especially if they are not in good locations,” Zhang said. The emerging winners in the sector are the bigger and better capitalized dealer groups, which continue to grow organically and through acquisitions. Pang Da Automobile Trade, the biggest Chinese auto dealer by market value, raised CNY6.3 billion in an April IPO in Shanghai. China Zhengtong Auto Services, the biggest Hong Kong-listed dealer, raised HKD3.13 billion in an August share sale that followed on its HKD3.65 billion IPO last December. Smaller rival Zhongsheng raised HKD1.3 billion selling shares in January. The company last year raised a combined HKD4.66 billion via a March IPO and a follow-on offering in October. Baoxin operates 28 full-service dealerships in China, mainly concentrated in  eastern coastal cities, and has plans to open 14 new one-stop showrooms and service centers by next June. Baoxin saw revenue rise 54% in the first half of the year to CNY5.23 billion, with luxury car sales accounting for 86% of the total by value, the South China Morning Post reports. Baoxin Chairman Yang Aihua expects sales of luxury cars in China would surge 44% to 1.3 million next year, after growing 30% to 900,000 cars this year. “Demand will still be strong next year, so we are bullish about our business. We hope to gain more luxury car brands,” Yang said. “Any slowdown in China’s economy may adversely affect demand for our automobiles. If there is any further fiscal or credit tightening by the Chinese government, demand for our automobiles as well as our access to external financing may decrease,” the prospectus said. The company plans to open showrooms in Zhejiang, Shandong and Tianjin, plus two dealership stores in Shandong and Liaoning, by the end of this year. More new stores and a repair center are on the cards next year in Tianjin, Guangdong, Jiangsu, Shandong, Zhejiang, Shanghai, Liaoning and Beijing.

Audi is preparing to more than double car production in China to 700,000 vehicles a year. Audi also said it would begin production in 2013 at a new 100-hectare plant in Foshan, which will manufacture up to 200,000 vehicles per year. “The new plant is an important milestone in our long-term growth strategy in China,” Rupert Stadler, Audi’s Chief Executive, said. Audi already builds long-wheelbase versions of its A4 and Audi A6 models, as well as the Audi Q5 at a plant in Changchun. This facility has an annual production capacity of 300,000 but this figure is set to rise to up to 550,000 in the next few years. Audi plans to manufacture a new version of its A3 hatchback at Foshan. Audi delivered 253,739 cars to Chinese customers, including Hong Kong, in the first 10 months of this year, an increase of 32% on the prior-year period. Chinese sales are expected to surpass 300,000 cars this year, cementing its place as Audi’s largest single market. However, analysts are uncertain about the outlook for the Chinese market. “The risk of a fall in BMW, Mercedes and Audi sales in 2012 is real,” Max Warburton at Bernstein Research told clients in a note, the Financial Times reports.

Production and sales by Shanghai Volkswagen both surpassed the 1-million-unit threshold in the first 11 month this year, a new record. Sales at the joint venture increased by 13.7% over the same period last year, a faster pace than the country’s overall auto market, which has cooled after two years of rapid growth. The company has already outstripped its full-year sales in 2010. Shanghai Volkswagen sold more than 110,000 vehicles last month, an all-time record high in its November sales figures. The Passat family has reported monthly sales of over 20,000 units, led by the New Passat launched earlier this year. Monthly sales of the Tiguan SUV hit 13,000 units, while the compact Lavida Langyi, maintained stable monthly sales of over 20,000 units this year. The Polo family registered monthly sales surpassing 12,000. All the cars now rank among the top in their segments and have the chance to become No 1, Thomas Zahn, Deputy Managing Director of SAIC-Volkswagen Sales Co and Executive Director of the Volkswagen brand of Shanghai Volkswagen, said. The Skoda brand also reported robust sales of more than 110,000 Octavia compact cars delivered between January and November. Its mid-sized sedan Superb and subcompact Fabia are also gaining popularity, each with sales of 40,000 units so far this year. At the Guangzhou auto show last month, the company debuted a new crossover variant of the Fabia, the Fabia Scout, offering a sporty and dynamic version of the brand. The joint venture has factories in Shanghai and Nanjing, and is building a new plant in Yizheng, Jiangsu province, to expand capacity, the China Daily reports. Shanghai Volkswagen Automotive meanwhile has received approval from the National Development and Reform Commission (NDRC) to start work on a CNY2 billion passenger car plant in Xinjiang, with an initial annual capacity of 50,000 sub-compact passenger cars per year.

The first locally made Mercedes GLK SUV rolled off the production line of Beijing Benz ― Mercedes’ joint venture with Beijing Automotive Group ― in Beijing. China’s SUV sector registered soaring 66% year-on-year growth in the first 10 months of 2011, far beyond the performance of the overall auto market. “No doubt, local production of the GLK is not only a benchmark in Beijing-Benz’s portfolio, but also shows the company’s confidence and perseverance to further tap China’s high-end auto segment,” said Xu Heyi, President of the joint venture. As an import, the high-end compact SUV sold 12,140 units in 2010 and 11,490 in the first six months of this year alone to become one of the most popular foreign-assembled luxury SUVs in China. The locally built model is almost exactly the same as the imported version, except with a bit longer wheelbase to suit domestic tastes. It is expected to go on sale around the end of the year at prices ranging from CNY380,000 to CNY400,000. The company will stop importing the GLK, said company executives. “Our sales are expected to grow over 85% in 2011 from last year, and revenues will greatly increase, too,” said Xu. Including imported vehicles, Mercedes-Benz reports year-to-date sales of 157,000 vehicles in China, a 36% increase over a year ago, already surpassing its full-year figure for 2010. Beijing Benz currently builds the long-wheelbase E-Class and new-generation C-Class in China, which generate about 30% of overall Mercedes sales in the country. In addition to the GLK, a new A-Class, new B-Class and a small SUV BLK will be made in China, the China Daily reports.