Shenzhen Hafei Automobile Base Lost Shenlong Automobile Plant No.2 Settled in Wuhan

Last week, the fierce competition over the location of Shenlong Auto Group's second plant came to a close. In a high-stakes battle between Shenzhen and Wuhan, the latter emerged victorious, securing the opportunity to become the new home for PSA Peugeot Citroen Automobile Company (PSA). Wuhan's win marked a major turning point in the strategic expansion of the joint venture. On Friday, Shenlong Motor officially announced that the second plant would be built in Zhuankou Development Zone, Wuhan. This decision ended months of speculation about where the new facility would be located. The announcement followed a board meeting held in Paris on July 6, 2006, where both PSA and Dongfeng Motor confirmed their support for Shenlong’s new industrial plan, which was unveiled in April of that year. According to the agreement, a new plant with an annual production capacity of 150,000 vehicles will be constructed in Wuhan. Located adjacent to Shenlong’s existing factory, the plant will include three main workshops—welding, painting, and assembly—and is expected to start operations by the end of this year. It will begin producing large sedans based on PSA’s No. 3 platform, marking a significant step in the company's product lineup. Just three months prior, on April 3, PSA had announced plans to expand its second plant and introduce nine new models by 2009, including a brand-new mid-to-high-end platform. With the ongoing expansion of the Wuhan plant, its annual capacity is expected to reach 300,000 units by 2008. Currently, the Wuhan plant produces seven different models, and the capacity expansion project is being implemented in stages. Wuhan’s final victory dealt a blow to Shenzhen Hafei Automobile, which had been actively pursuing a partnership with PSA since last year. According to sources within Shenlong Motors, PSA had engaged with several mainland companies, including Hafei, with multiple discussions taking place. Although PSA President Foltz publicly rejected a joint venture with Hafei, the company may still explore other business opportunities in China. Notably, Hafei’s Shenzhen base became a potential candidate during PSA’s site selection process. The Shenzhen-based production facility, located in Bao’an District, is Hafei’s second production base in China. Despite the loss, Hafei has not abandoned its interest in collaborating with PSA. According to Shenlong, the company remains open to alternative cooperation models, even if the second plant is now set in Wuhan. Both Shenzhen and Hafei continued to push hard until the final decision was made, but Wuhan’s long-standing relationship with Dongfeng and favorable conditions ultimately won out. PSA has clearly placed its bets on Dongfeng, as evidenced by the recent decision to abandon Shenzhen as the second plant location. This move underscores the growing influence of Shenlong Motor, which has seen a steady rise in performance and profitability for PSA in China. In the first half of the year, Shenlong Motors reported a 38% increase in sales compared to the same period last year, reaching a total of 100,200 units. For 2006, the company aims to exceed 200,000 sales, a target it is well on track to meet. With the recent launch of the Dongfeng Peugeot 206 and the Citroen Triumph, Shenlong is well-positioned to achieve its goals. Looking ahead, Shenlong will introduce PSA’s No. 3 platform, starting with the Peugeot 407, a new mid-to-high-end model. This addition completes Shenlong’s full range of products from compact cars to premium models. From 2006 to 2009, the company plans to launch a total of nine models, with three expected in 2006 alone. According to recent reports, PSA’s global sales saw a slight increase of 0.6% in the first half of the year. Meanwhile, Shenlong Motors continues to perform strongly, solidifying its position as a key player in the Chinese automotive market. Next year, the Peugeot 407 will go into production, becoming the most premium model produced by Shenlong. The T63 code, used internally for the 407, signals a major milestone in the company’s product development strategy.

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