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French carmakers PSA Peugeot Citroen and Renault reported weak first-half car sales on Thursday as they both tried to maintain margins in an increasingly competitive market environment.
PSA eked out a small 0.6 percent rise as it benefited from a steady stream of launches such as the recent Peugeot 206 compact car. Cross-town rival Renault suffered a 3.2 percent decline after warning that 2006 would be a transition year as it kicks off a recovery plan and will have no new models until 2007.
Renault's commercial director, Patrick Blain, told Reuters the group stuck to its target of stable car sales in 2006 and that its operating margin was in line with forecasts.
This helped boost Renault shares by 2.28 percent to 83.10 euros at 1235 GMT. PSA slipped 0.33 percent to.51 euros. Analyst Gaetan Toulemonde at Deutsche Bank noted that PSA's product mix had deteriorated, with entry-level cars Peugeot 107 and Citroen C1 up strongly. The French groups' performance also paled in comparison to an 8.7 percent first-half rise for Germany's Mercedes and a 9.8 percent jump at Volkswagen unit Audi.
Both Renault and PSA reported strong sales outside west Europe and noted fierce competition in the market. Peugeot's brand director, Frederic Saint-Geours, told a news conference the competition was "extremely fierce and strong" but that Peugeot had managed to reduce its stocks of unsold cars and kept a 2006 sales target of more than 2 million vehicles.
At Citroen too, brand manager Claude Satinet stuck to a 2006 target of 1.4 million to 1.45 million cars, but officials declined to make margin comments ahead of first-half results due July 26.
PSA said sales of passenger cars and light trucks slipped 2.2 percent in western Europe, which accounted for most of the total 1.76 million vehicles sold in the first half. It said the region should return to growth, especially with its key Peugeot 207 model, which it launched in the second quarter.
Renault, which is looking at a possible tie-up with its Japanese partner Nissan Motor Co and General Motors Corp, said a decline to 1.31 million vehicles stemmed partly from its decision not to match rivals' price cuts. In February, Renault unveiled a recovery plan for the period to 2009, aiming to boost sales with new models while keeping strict control over costs.
Renault said total sales in Europe, which it defines as 31 countries, fell 7.6 percent, but they rose 16.5 percent in the so-called Euromed region, which includes some eastern European states, Turkey and northern Africa.
Full-year global sales should remain stable compared with 2005, with the help of the relaunch of the Scenic multi-purpose vehicle, Blain told Reuters. Blain urged the industry to stop the price war and focus instead on structural issues, especially overcapacity.

Copyright Reuters, 2006

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