Auto JVs to benefit from cheap EU imports

09:17, May 27, 2010      

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PSA Peugeot Citroen and Volkswagen AG's joint ventures in China will benefit as a weaker euro reduces the cost of components imported from Europe, Nomura Holdings Inc analysts said.

Dongfeng PSA, a partnership between France's Peugeot and Hubei-based Dongfeng Motor Group Co, will be the biggest beneficiary, Hou Yankun, an analyst at Nomura, said on Tuesday. A 15 percent drop in the euro may boost earnings at Dongfeng PSA by as much as 5 percent or 250 million yuan ($36.6 million), Hou and fellow analyst Xu Ming wrote in a report this week.

For European carmakers in China, the world's largest auto market, "the import of components from their home countries is one way to make profit", Hou, based in Hong Kong, said.

The euro has declined 14 percent against the US dollar this year on concern that a government debt crisis may spread from Greece, and reached a four-year low against at $1.214 on May 19. The currency's decline increases the competitiveness of Europe's carmakers and auto parts suppliers in China, where the yuan has been pegged at about 6.83 to the US dollar for almost two years. China is also under pressure to revalue its currency.

European auto joint ventures in China rely on imported car parts more than the industry average, Hou said. "China still doesn't have the economical scale to produce high-tech components," he said.

Peugeot added 40 cents, or 2.2 percent, to 18.48 euros at 9:07 am in Paris trading. Volkswagen rose 40 cents, or 0.6 percent, to 66.52 euros on the Frankfurt exchange.

Source: China Daily


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