DFMLogo.gifEurope’s car industry is still stuck in reverse gear and the European market is predicted to contract for its sixth consecutive year.  So why would China’s Dongfeng be interested in investing in loss-making French carmaker Peugeot?

This story was circulating back in the summer — see this EngagingChina post — and has surfaced again after the French company confirmed to the Financial Times that it was in discussion with “potential overseas partners” prepared to invest fresh capital into the cash-strapped firm.

According to local media reports in China,  Dongfeng has offered to to buy a 30 per cent stake in Peugeot for RMB10bn ($1.6bn), although both companies denied that any agreement had been made.

The two companies already have a JV that operates assembly plants in China, so an equity investment would make sense, and of course, PSA has a variety of platforms that Dongfeng could revamp or adapt to Chinese market.

Nevertheless, Chinese carmakers are no longer desperately seeking western technical or design skills for their Made-in-China cars so its debatable quite how much value a more far-reaching tie-up with Peugeot would help Dongfeng in the Chinese market.

Stranger things have happened of course and there’s no denying that Chinese has eyes on the western car industry, particularly those OEMs with prestigious brands that have fallen on hard times — like Peugeot.