France's PSA to sell stake in smaller Chinese tie-up as sales slide

By Gilles Guillaume and Yilei Sun

PARIS/BEIJING (Reuters) - Peugeot maker PSA Group <PEUP.PA> said it is preparing to sell its 50% stake in an eight-year-old joint venture with Chinese partner Chongqing Changan Automotive <000625.SZ> which has struggled with falling sales.

The announcement in Paris on Thursday came after Changan also signalled in regulatory filings earlier this month that it was seeking a buyer for its half of the Shenzhen-based venture known as CAPSA, which builds cars under PSA's premium DS brand.

PSA's move highlights how global car manufacturers are struggling in the world's biggest auto market, where sales contracted last year for the first time since the 1990s.

It also plans to cut jobs and drop two of the four assembly plants it shares in a larger join venture with China's Dongfeng Group <0489.HK>, which builds Peugeot and Citroen cars, Reuters reported in August.

A PSA spokesman said the French company still hoped to roll out DS cars in China and a "new strategic plan" would be presented in the coming weeks or months.

The partners planned to continue building DS-branded cars at the Shenzhen plant, a China-based PSA spokesman said on Friday.

PSA's sale plan would be presented to French unions on Friday, a source familiar with the matter said.

PSA's sales in China fell in 2018 by 32% to 262,583 vehicles, a long way off the 1 million-a-year target it had set itself a few years ago.

Changan said it is seeking a floor price of 1.63 billion yuan (180.83 million pounds) for its stake in the joint venture.

(Reporting by Gilles Guillaume and Yilei Sun; Writing by Sarah White; Editing by Geert De Clercq and Stephen Coates)