PSA Group (PUGOY)  fell to the bottom of the CAC-40 benchmark Wednesday after the Peugeot and Citroen carmaker posted a 4.9% increase in first quarter sales but said it will take "some time" to address ongoing issues in its key China market.

Total revenues for the quarter came in at €13.6 billion ($14.9 billion), up from €13 billion in the year-ago period thanks to strong demand for new models and a sharp increase in auto parts sales. Automobile sales up 2.5% to €9.01 billion while parts sold by its Faurecia unit rose 9.4% to €5.1 billion. 

Peugeot shares fell 1.6% to €18.65 in early trading Wednesday, however as investors took profit following a five day rally that had added over 6% to the stock and amid ongoing problems for PSA in China.  

"Auto and group revenue (were) broadly in line (both 0.9% above consensus)," noted Goldman Sachs. "Auto revenue growth of 2.5% was largely driven by product mix (3.7%) improvement owing to new launches, more than compensating for FX headwinds of 1%."

PSA, which is in the process of buying the European operations of General Motors, has steadily increased revenues since 2015, following its near collapse a year earlier, as CEO Carlos Tavares has accelerated the rate of new model launches and shifted the product mix toward larger sports utility vehicles. Tavares has promised to increase revenues by 10% over the three years to the end of 2018 and by an additional 15% by 2021.

PSA's sales growth has been helped by a rebound in European auto sales that was reflected Wednesday in the results of Germany's Daimler (DDAIY) , the parent company of Mercedes, which on Wednesday posted an 11% increase in sales.

There were some blips in PSA's first quarter figures, notably in China, where volumes dipped 46%. PSA told analysts the fall was due to a "non performing sales organization," and warned that it did not expect significant near-term improvement as it needs to restructure operations and hire new staff. China is expected to be the world's fastest growing car market this year, with sales tipped to grow 5%, compared to about 1% in Europe.

PSA's sales in Europe were flat over the quarter at €464 million, while PSA's best performing region was the Middle East and Africa, revenues grew three fold after the company returned to the Iranian market following the lifting of sanctions.  

The company's total revenue figure was buoyed by strong sales of its more expensive SUV's including the newly launched Peugeot 3008, as well as its work van Citroen LCV and its smaller four door Citroen C3. PSA's 3008 and its newly launched DS7 Crossback SUV are both seeking to tap into strong demand for high-riding sports vehicles.  

The Paris-based group did not provide any major update on its €1.3 billion acquisition of GM's European car brands Opel and Vauxhall, which is due to complete before the end of the year.