Peugeot Maker Says Au Revoir to Nearly Half of Its Sales in China

French carmaker Groupe PSA, maker of Peugeot and Citroen cars, said its sales in China plummeted 48.7% year-on-year in the first half of 2017 even as its global sales rose.

PSA’s sales plunge highlighted the sluggishness of China’s auto market in the wake of the government’s withdrawal of tax incentives designed to stimulate sales of small-engine cars. In the first half, vehicle sales edged up 3.8%, far slower than the market’s 15% growth over the same period in 2016, according to the China Association of Automobile Manufacturers (CAAM).

The decline in PSA’s first-half sales worsened from a 46% drop in the first quarter of the year, according to the financial results released by the company on Wednesday.

Specifically, sales dived 48.2% year-on-year to 147,800 vehicles at PSA’s main joint venture in China with Dongfeng Motor Group Co. Ltd., and plunged 64% to 3,133 vehicles at its smaller joint venture with Changan Automobile (Group) Co. Ltd.

PSA has had a much rougher time in China than its competitors, which have also seen sales slow. German luxury automaker Audi saw its first-half sales fall 12.2% year-on-year, and Ford Motor Co.’s first-half sales slid 7%.

Net losses accompanied PSA’s sputtering sales. The Dongfeng venture, which makes cars under PSA’s mainstream Peugeot and Citroen brands, reported a loss of 50 million euros ($58.3 million) in the first half of the year, compared to a profit of 190 million euros for the same period last year.

The Changan venture, which makes the company’s upscale DS cars, lost 17 million euros in the first half of the year, exceeding the 15-million-euro loss it reported for the first half of 2016.

Dongfeng Vice President Liu Weidong said in April that there were three reasons for the company’s poor performance in China, including its late arrival to the popular SUV segment in China and growing competition from Japanese brands. The third cause was the central government’s anti-monopoly policies that interfered with the company’s power to set final sales prices for dealers.

In contrast to the downward trend in China, PSA’s global profits and revenues grow by 91% and 5% respectively in the first quarter of 2017, while sales rose by 2.3%.

PSA was one of the first foreign carmakers to arrive in China, the world’s largest auto market. China now accounts for 9.6% of PSA’s sales. It is the company’s third-largest market after Europe and the Middle East.

Despite its poor performance, the Paris-based carmaker won’t lower its 5% sales growth target for China in 2017, the company said in its half-year report.

French car brands have been losing money in China since the second half of 2015, according to data acquired by Caixin.

Their share of the market fell to 1.7% in the first half of 2017, down from 2.7% in the first half of 2016, according to CAAM.

Contact reporter Song Shiqing (shiqingsong@caixin.com)