UPDATE 1-Europe lifts Peugeot sales despite slump elsewhere

Thu Jul 17, 2014 5:09am EDT

* Vehicle deliveries up 5.5 pct in first half

* Sales up 28 pct in China

* New models help European growth (Adds comments, details, background)

By Laurence Frost

PARIS, July 17 (Reuters) - PSA Peugeot Citroen's first-half vehicle deliveries rose 5.5 percent, the French carmaker said on Thursday, as a European recovery and Chinese expansion made up for a currency-driven sales collapse in the rest of the world.

Deliveries rose to 1.54 million vehicles in January-June from 1.46 million a year earlier, Peugeot said in a statement.

The Paris-based carmaker, which is struggling to return to profitability under new Chief Executive Carlos Tavares, gained European market share with the help of new models and recovering demand in France, Spain and Britain.

Peugeot shares were up 1.7 percent to 11.68 euros at 0811 GMT, valuing the company at 9 billion euros ($12.2 billion).

Sales rose 28 percent in China, where the group is making up for lost time by expanding production in separate joint ventures with 14 percent shareholder Dongfeng Motor Group and Changan Automobile Group.

But Peugeot blamed a weakening of emerging-market currencies for a brutal sales decline in almost every other major market.

"The rouble-euro exchange rate is particularly devastating," Peugeot brand chief Maxime Picat told reporters in Paris.

Political tensions and slowing economies have combined to create "sharply deteriorated situations" in many emerging markets, Picat added. "It's a pretty explosive cocktail."

Peugeot said European sales advanced 11.7 percent to 956,000 cars and trucks, almost doubling the market's growth rate.

But deliveries plunged by 26.8 percent in Latin America, 25.8 percent in Russia and 37.2 percent in Africa and the Middle East - far outpacing each market's decline.

Weaker currencies have hurt Peugeot's overseas competitiveness because it buys a smaller share of components locally than major rivals such as Renault in Russia, for example.

By 2018, Tavares has pledged to increase Russian sourcing to 50 percent of parts used at the company's Kaluga plant from just 30 percent last year. A similar goal exists for Latin America.

If the emerging markets slowdown continues, however, shrinking volumes could endanger that effort as well as the company's goal of generating 50 percent of its global sales outside its home region by 2016.

Europe's share of global deliveries actually rose 3.4 percentage points to 62 percent in the first half, largely the result of Peugeot's wipeout in emerging markets.

"We are becoming a little more dependent on Europe again, which is bad news for our internationalisation goal," Picat said. "But we're not going to complain if Europe is doing better." ($1 = 0.7390 Euros) (Reporting by Laurence Frost; Editing by Dominique Vidalon and Keiron Henderson)

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