Features
27 Feb 19

Strategic market expansion ahead at PSA

If car manufacturers have learned anything from the 2016-2018 period, it’s that globalisation needs to be approached with great care. PSA has placed bets on high odds by investing in its 2 partnerships in China (Dongfeng and Changan) but faced a make-or-break scenario in 2017, selling just over half of the vehicles sold in 2014 (734,000 in 2014 versus 387,000 in 2017). According to consultancy company Roland Berger, PSA’s products were not adapted to the Chinese customer.

Not doubting Roland Berger’s analysis, it is however important to add that foreign expansion is more complex than manufacturing. In China’s case, the wholesale-to-retail distribution chain in infinitely more complex than in other countries and supporting profit centres, such as remarketing, are immature.

Blue skies and green fields

But PSA is taking the lessons learnt to heart. By the words of Larry Dominique, PSA’s North America chief: "Taking the time to do it the right way — launching the product when you’re ready, building the business and scaling it as you develop success, is the way we want to approach the market." Dominique is referring to Peugeot’s re-entry to the US market, announcing a build-up period until 2026 during which PSA will launch Peugeot retail in the US and Canada.

The brand exited the market in 1991 due to its low sales (a mere 4,292 units in 1990), but also to recession and rising regulatory costs.

Production and distribution

The US models are meant to be imported from Europe and China; local production is not in scope at this point in time. On the questions whether, in today’s tariff turmoil, this is the best strategy for the brand, CEO Tavares said: "I'm going to wait for the current negotiations to give us more visibility on the tariffs."

Tavares also hinted that, rather than building a dealer network, PSA has identified a "creative and disruptive way to distribute our cars." It is understood that this means that mobility solutions will be Peugeot’s go-to-market strategy. PSA’s Free2Move brand has already been launched in Seattle and Washington; both the mobility brand and the car brand could benefit from PSA’s push to reinstate Peugeot in North-America.

Meanwhile in Russia

Even if GM pulled out of Russia in 2015, the Opel brand is still very much alive, with half a million units on the road. PSA, since 2017 owner of Opel and Vauxhall, does not intend to lose momentum and has announced the brand’s re-entry in the Russian market.

PSA owns a plant south of Moscow, that might be producing for the Russian market; although there’s no intention to continue models that use GM platforms (Astra, Mokka), a PSA spokesperson told Reuters: "Local production is one of the priorities and the main tool of a successful automotive business in Russia. Taking this into account, we are considering the possibility of expanding the model range in Kaluga and do not rule out assembling Opel cars there."

Global strategy

Next to the above, PSA will also be launching its Citroen brand in India and has been vocal about collaborations in Latin America. Aligning and managing these different expansion projects whilst integrating the Opel brand in its manufacturing and sales strategy, will keep the PSA people busy for a while. After the German OEMs and French competitor Renault, it’s clear that PSA’s global growth strategy is reaching full speed.

Authored by: Yves Helven