PSA Peugeot Citron and China-based Dongfeng have agreed to develop a technology platform for small cars.
The companies will invest around €200m to create a global platform to manufacture B and C segment vehicles under the Peugeot, Citron, DS and Dongfeng brands.
As part of the project, a joint R&D center will be established in Shanghai to develop products and technologies for Asian markets.
The Common Modular Platform (CMP) is claimed to offer effective modularity, versatility, equipment and carbon reduction solutions.
PSA Peugeot Citron said in a statement: "The new platform will enable PSA Peugeot Citron and DFG to manufacture vehicles in their respective growth regions."
Peugeot will spend 60% of the expenditure, while the remaining 40% will be provided by Dongfeng.
The company will make use of Dongfeng's supplier base expertise in China and the ASEAN countries thereby facilitating its plans to meet cost targets in competitive segments.
In China, the companies intend to sell 800,000 vehicles this year and 1.5 million vehicles by 2020, Reuters reported.
Peugeot and Dongfeng partnership commenced with last year's €3bn tie-up to rescue the troubled French carmaker.
