Global Insight Perspective | |
Significance | PSA lost 3.5% of its Western European passenger car and LCV volumes during the period under review, which was offset by a 19.8% increase in its sales in other parts of the world. From a brand perspective, the growth came entirely from the larger Peugeot nameplate. |
Implications | PSA has long named reducing its dependency on the ultra-mature—and largely stagnant—Western European market as one of its key strategic aims, which it continues to be successful in. However, the fact that the Peugeot brand has driven first-half growth is a turnaround, as it is actually the Citroën brand that has accounted for most of the group's growth so far this decade. |
Outlook | PSA is maintaining its forecast of 5% global sales growth for the full-year 2008, despite predicting that the key Western European market, on which it still relies for two-thirds of its sales, will shrink by 4%. The Group is also determined to retain its leadership in low-emission vehicles, despite some stiff competition from rivals, highlighted by the announcement that it will fit Stop-Start technology to one million cars by 2011. |
Peugeot Brand Drives Growth in First Half of Year
Europe's second-largest carmaker PSA Peugeot-Citroën of France has announced a 4.6% growth in its global vehicle sales in the first half of the year to 1,845,000 units, up from 1,764,000 sales in the corresponding period in 2007. 58.5% of those (or 1,080,000 units) were Peugeot-branded vehicles and 41.5%, (765,000 units) were Citroën-branded. That means that Peugeot sales increased by an impressive 8% in the period, driven mostly by the brand's expansion in the emerging countries of Russia, Brazil, Argentina and China. Six-month sales from the smaller Citroën brand flatlined, on the other hand, managing year-on-year (y/y) growth of just 0.1%, despite a massive 72% surge in sales in Brazil and Argentina which was offset by declining sales in Russia, China and of course Western Europe. Most of the Group's growth also came from completely knocked down (CKD) kits, built in locations such as Morocco and Iran, which increased by 78% to 166,000 units up from 93,000 a year earlier. Stripping out CKD sales, and thus taking into account assembled vehicles only of which 1,679,000 units were sold, PSA's y/y growth stood at 0.5%.
From a model perspective, PSA named its key growth drivers during the period as:
- Peugeot 308: With 150,000 sales of this model as of the end of June 2008, PSA says it is on track to meet its yearly sales targets of this newly launched car. Currently, only the 308 sedan is for sale in Europe. The estate (SW) version was launched in France in the middle of May and will go on sale across Europe in the next few months. PSA attributed much of the early sales success of the new 308 to "record quality levels at launch stage".
- Peugeot 207: So far in 2008, 276,000 Peugeot 207s have been sold, which PSA described as a "sound result".
- Citroën C5: Already available in sedan and estate versions, some 30,000 units of Citroën's new "premium" car have been sold in the first half of the year, with an equivalent number apparently on order.
- Citroën Berlingo and Peugeot Partner: PSA has sold 36,000 of the new versions of these popular light commercial vehicles (LCVs) in addition to the old versions of these vans, which are still on sale.
- Low-emission vehicles: With sales of more than 300,000 vehicles emitting less than 120 gkm and 220,000 vehicles emitting between 121 and 140 g/km CO2, PSA Peugeot-Citroën claims leadership in the segment of low-consumption and low CO2-emitting vehicles.
Market Share Lost in Key Western Europe Region
From a regional perspective, PSA lost 3.5% of its registrations in the Western European market, which itself contracted by 3% in the period under review. This means that the Group has lost one tenth of a percentage point of market share since the first half of 2007, taking a 14% share of the region's passenger cars and LCV sales in the first half of this year. In total, PSA sold 1,230,000 vehicles in Western Europe in the first six months of 2008, equivalent to two-thirds (66.67%) of its total global sales. With regards to LCVs only, however, PSA took a 19.6% slice of the regional market, up by eight tenths of a percentage point compared with the previous year.
"Despite a tough economic environment, PSA Peugeot-Citroën has maintained and consolidated its position as the second passenger carmaker in Europe and the number one LCV manufacturer," it said in a statement.
In its home market of France, PSA increased its share, taking 31.8% of the country's passenger car and LCV registrations, after its sales increased by 5.3% to 439,000 vehicles in a market that grew by 4.6%. This means that France accounted for 23.8% of PSA's total global sales during the period. Elsewhere in Europe, PSA reported mixed results. For example in the United Kingdom, it said it had decided to limit its sales due to the unfavourable pound/euro exchange rate and so had lost a considerable amount of sales and 1.5% of market share. In the troubled markets of Spain and Italy, PSA also lost considerable amounts of sales whilst keeping its market share stable whilst in the recovering German market, both sales and market share increased.
Sales Surge in South America and Russia
As expected, the main growth continues to come from outside a largely stagnant Western Europe, mainly from what PSA terms its priority growth regions, namely the South American trade bloc of Mercosur, China, Russia and Eastern Europe. PSA's non Western-European sales jumped by 19.8% in the first half of the year to 635,000 units. PSA notes that in these three groups of countries, its aim is "to achieve national carmaker status by offering its customer base a range of locally-produced vehicles to meet all their expectations."
Looking at these areas more closely, PSA's Brazilian sales surged by 38% to 75,900 units, enabling it to gain four-tenths of a percentage point in this important market. Citroën's 72.1% sales increase in this region was particularly impressive. "The strategic decision to set up a Mercosur Business Unit in February 2007 has proven all its relevance and enabled the Group to confirm its growth objectives in this part of the world," PSA said in a statement. In Russia, PSA's sales leapt up by 61.5% to 25,200 units in a market that grew by a lesser 34.1%, driven by a doubling of sales from the dominant Peugeot brand in this country, while Citroën actually lost more than a quarter of its volumes.
In Eastern Europe, on the other hand, PSA's growth rate was slower than that of the overall market, as was the case (and more markedly so) in China, where PSA's Chinese joint venture increased sales by 2.9% in a market that grew by 13.7%. However, PSA says that its plan to reenergise sales in China, after a slowdown in the Group's sales in 2007, is starting to "bear fruit". Its plan included the setting-up of the Citroën head office in Shanghai, restructuring the Citroën network and marketing the new models of the Peugeot 307 hatchback and Citroën C-Elysée.
PSA to Fit Stop-Start in One Million Cars by 2011
In other PSA news, French supplier Valeo has announced that it has signed a contract to supply France's number one vehicle manufacturer with more than one million Stop-Start kits by 2011. Valeo says that with its Stop-Start technology, which automatically cuts off the engine when the vehicle is at a standstill and restarts it silently and instantaneously when the brake pedal is released, fuel consumption and CO2 emissions can be reduced by up to 15% in urban driving cycles.
"This is an important contract," declared Thierry Morin, Valeo Chairman & CEO in a statement. "The confidence expressed by the PSA Group through this contract shows that our strategy is supported by automakers. Our objective is to develop, as of today, affordable solutions accessible to the greatest number of motorists."
Valeo notes that ever-growing urban populations are making cities increasingly congested. It is estimated that, in cities, a car already spends up to one-third of its time at a standstill with the engine idling unnecessarily. In this situation, the usefulness of the Stop-Start function becomes clear. The supplier also notes that thanks to its non-intrusive architecture, it can be easily installed on any new vehicle, replacing the traditional alternator and starter motor.
PSA Peugeot-Citroën was the first automaker to adopt this system in volume production on the Citroën C2 and C3 models. Valeo also equips the smart micro-hybrid drive car with Stop-Start and says it expects to announce additional contracts in 2008.
Rumours of Job Cuts at Poissy
Meanwhile, French newspaper Le Monde has reported that PSA could axe 200 jobs from the night shift at its Poissy factory in central France. This would be because of a drop in production of the all-important Peugeot 207 model from 55 vehicles to 25 vehicles per hour, according to the newspaper which quoted a trade union official as its source.
This report contrasts with Global Insight's previous outlook for the plant. Noting that Poissy is still the biggest plant for the successful 207 model, we had expected it to retain this position in the coming years, even if PSA's Slovakian factory is building greater 207 volumes. Given the lacklustre results for the Peugeot 1007, Poissy basically depends on the 207 for its activity. We had expected output to peak at the plant at 248,000 units in 2008.
Outlook and Implications
These results were largely expected from PSA. It has long been one of the Group's strategic aims to reduce its sales dependency on Western Europe, which at best is stagnant, and at worst slowing. For example, ten years ago, in 1998, just 15.7% of the Group's sales were derived from outside the region. In 2007, that had risen to 32.2%.
What could be considered more of a surprise is the fact that Peugeot has accounted for all of the Group's growth so far this year, after it has been the case that Citroën's sales have been up on a steep upward trend as Peugeot's have been losing momentum. For example, between the years of 2000 and 2007, Peugeot's global light vehicle sales grew by 17.5% and Citroën's by 28%. When comparing the 2004–2007 period, however, Peugeot's sales fell by 3%, while Citroën's increased by 8.4%. In 2004, Peugeot accounted for over 60% of PSA's annual light vehicle sales. By 2007, this had fallen to 57.4%, which was its lowest contribution to the group's volumes since 1997. However, in the first half of this year, Peugeot's share of Group sales can clearly be seen creeping back up.
Looking to the second half of the year, PSA predicts that the slowdown already being seen in the Western European market will accelerate, leading to a decline of around 4% in the full-year 2008 compared with 2007. Offsetting this to a certain degree will be the Group's double-digit growth in its aforementioned priority regions, it says. PSA is also clearly determined to capitalise on its position as one of Europe's cleanest carmakers, and says it sees itself benefiting from its leadership in low-emission vehicles more in the future, as well as from its LCV expertise. The Group says it will also "enjoy the full impact" of its recent model launches in the rest of 2008, that is to say the new Peugeot 308 and Citroën C5 ranges, its brand new compact LCVs, the Peugeot Bipper and Citroën Nemo as well as the more established Partner and Berlingo vans, as well as the new models launched recently in the emerging countries. As a result, the Group has maintained its forecast of achieving global consolidated sales growth of 5% for the full-year 2008.