PSA Peugeot Citro?n plans to create an all-new passenger car brand in China based on models from Chang'an Automobile Group, its newly courted local partner, to tap the world's biggest vehicle market, according to an anonymous industry source with knowledge of the matter.

The two parties signed a letter of intent on May 6 to set up a 50-50 joint venture producing "environmentally friendly passenger cars" and light commercial vehicles, the source said without revealing further details.

The industry insider added that light commercial vehicles made at the joint venture will carry the Peugeot or Citro?n marque.

The plan reveals another dubious shift by the French carmaker to further its interests in China's vehicle market, where it trails a phalanx of international rivals and homegrown players.

The scheme is part of a dual-partner trick by PSA Peugeot Citro?n to check its existing long-time associate, Dongfeng Motor Corp. The two companies run a joint venture in the city of Wuhan assembling Peugeot and Citro?n passenger cars.

But the French carmaker's short lineup doesn't offer enough new passenger car models for its latest sweetheart, Chang'an.

So PSA Peugeot Citro?n will create a new brand based on passenger car models from Chang'an.

But there is doubt what passenger car models Chang'an could offer and whether they will have competitiveness in China's robust car market and among rapidly maturing consumers.

Chang'an is one of China's top minibus producers. It also partners with Ford and Suzuki to make passenger cars. It began making its own-brand cars several years ago.

The Peugeot and Citro?n brands are not well recognized by Chinese car buyers due to poor branding strategies, so an all-new marque would be even more obscure.

Hyper-competition is expected in China's passenger vehicle market where, according to JD Power, there will more than 90 brands and 300 locally made models contesting for buyers by 2015.