Europe's automobile market has stabilized and is likely to grow by only 1% to 2% annually on average over the next 10 years, PSA Peugeot-Citroen (UG.FR) Chief Executive Philippe Varin said Thursday.

Addressing the World Investment Conference, Varin said the sluggish growth expected in Europe means Peugeot-Citroen will rely on countries outside Europe to drive sales growth.

European automobile sales are expected to contract between 9% and 10% this year, after a 5% fall in 2009, Varin said. "Asia is going to be the place to be," he added.

France's leading automotive group is gearing up for a major push into fast-growing markets, notably with the creation of a new range of entry-level cars specifically engineered for consumers in Asia, Latin America, the Middle East and Africa.

"European car makers have to work better together" to develop technology for environmentally friendly vehicles, he said. "Daimler (DAI.XE) and Renault (RNO.FR) are teaming up and we have good strong cooperation with BMW (BMW.XE) in gasoline engines and we can expand it," he said.

He said unlike auto maker competitors in Japan, the U.S. and probably China too who benefit from funding for research and development, European car makers don't have real access to European Union funding.

-By David Pearson, Dow Jones Newswires; +33140171740, david.pearson@dowjones.com
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