The chief executive of Peugeot Brand — part of PSA Peugeot Citroen — told CNBC that the struggling car marker was not in fundraising talks with Dongfeng Motor Group, following reports that the Chinese firm could purchase a 30 percent stake in it.
Shares in PSA Peugeot Citroen plummeted over 10 percent last week on rumors that the French company was planning a 3 billion euro ($4.1 billion) rights issue, with equal stakes to go to the French state and Dongfeng.
And this Monday, shares closed nearly 6 percent lower after UBS released a note saying it did not see Peugeot as a standalone car maker in the future.
(Read more: Peugeot stock tumbles on rights issue reports)
However, when questioned by CNBC, Peugeot Brand CEO Maxime Picat said that Peugeot and Dongfeng were simply discussing new projects.
"We are only talking with them about finding new projects, developing," Picat said. "We have already this month sold cars, produced in our joint venture in China, in countries in Asia... we are only talking about this kind of development."
Peugeot, which has market capitalization of around 4.4 billion euros, has suffered deeply from the downturn in the European car industry since the financial crisis. For the first half of the year, the automaker reported a negative free cash flow of 51 million euros and a net loss of 426 million euros.
(Read more: Peugeot loses ground as Europe car slump continues)
However, Picat told CNBC he was optimistic about Peugeot's future.
"Currently we have very strong financial security of more than 11 billion euros, so we don't have any short-term issues about that," he said.
"We need to keep on improving our situation in Europe: this is the reason why we had to close the plant where we produced the latest car just one or two days ago, and we have to keep on improving our situation in Europe and improving our development outside of Europe," he added.
Picat said that about 45 percent of the car maker's sales were outside of Europe and that the partnership with Dongfeng was helping create "new industrial and commercial developments".
He added that Peugeot saw the future of the auto industry being guided by the development of the hybrid car —a vehicle that uses two or more power sources.
"Our forecast shows us that before 2020 the growth of electric cars will remain quite slow and the most important technology will be hybrid technology," Picat said. "This is the reason why we are turning all our energies and development towards hybrid technology."
(Slideshow: 10 luxury hybrids)