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PSA Gingerly Tests U.S. Temperature For Full-Blooded Return

PSA Gingerly Tests U.S. Temperature For Full-Blooded Return.

“This will give us tremendous insight into how we can structure our sales, service and repair network as we move toward providing automobiles in the future,”

You can’t accuse PSA Group of France of rushing in where angels fear to tread.

It has expressed the wish to return to the U.S. market by setting up a mobility services operation called Free2Move, although at this stage it doesn’t plan to use any of its own vehicles. And it has also announced that all its future new vehicles will be designed to meet American regulations if maybe perhaps it decides to resume selling vehicles in the U.S., which it stopped doing in 1991.

PSA sells cars, SUVs and vans mainly in Europe and China through its Peugeot, Citroen and DS brands. It now also owns Opel and Vauxhall, which it bought from General Motors Europe earlier this year.

Free2Move is an app which connects to different kinds of transportation services including car-sharing, ride-hailing, bike-sharing, public transport.

In an interview, Larry Dominique, president PSA North America said currently there are no plans to sell any PSA models in the U.S. but Free2Move marks the company’s return.

“As we grow the service Free2Move provides, we will gain a better understanding of the way today’s customers are – and will – consume transportation from more traditional car ownership to car/bike sharing, rental and subscription based models.  This will give us tremendous insight into how we can structure our sales, service and repair network as we move toward providing automobiles in the future,” Dominique said in an email.

Some cynics view the sudden increase in peripheral so-called “mobility” services like UBER and others as something of a fashionable knee-jerk reaction by companies desperate to be seen as having an answer to the coming revolution in technology.

“While you correct in saying that Uber has revolutionized the taxi business, there are a wide range of other services that go beyond short-haul, individual car livery. Companies like Car2Go, TravelCar and Via provide unique services, including one-way, roundtrip, vacation/holiday vehicle rental, personal “rapid transit” etc.  Take a look at some of these companies and you’ll see a wide range of services that go well beyond the traditional taxi model. Finally, Free2Move also includes bike sharing, which further adds to the options a consumer has in a city environment,” Dominique said.

PSA introduced the app a year ago and now operates in Germany, Italy, Austria, Sweden, Britain, Spain and France. It provides about 100,000 cars to more than 500,000 customers in Europe, Dominique said. The operation includes vehicles not made by PSA. He declined to reveal financial details.

The rationale for a lot of these new services seems to be that young people are no longer interested in owning their own cars, and are excited about renting, hiring or hailing transportation services only for when they really need them.

But when and if economies finally drag themselves out of the great recession and the young have money to spend again, won’t these mobility services like UBER be seen as really only reinventing the taxi, or the bus?

Mobility solutions
“That’s not what we’re finding. While younger folks are early adopters to these types of services, seniors, urban dwellers and parents are finding these types of mobility solutions attractive. The way people are consuming transportation is in transition. It’s also important to note that using these types of services and personal car ownership aren’t mutually exclusive,” Dominique said.

 Dominique wouldn’t be drawn on when PSA would resume U.S. auto sales, or what vehicles would lead the charge. Given that the previous venture crashed and burned, why would PSA now be successful in the U.S. What attributes would it bring to bear to make itself an attractive proposition?

“Style and design are becoming more important in the U.S. now that automotive quality and dependability have become “expected” in the industry today.  We see a market that is increasingly adding “differentiation” to their list of desirable brand traits.  When we were last in the U.S market, consumer attitudes were quite different as the industry was largely divided by domestic brands (price and product offerings such as full-size trucks) and quality (Asian imports).  Today’s market is vastly different,” Dominique said.

PSA, at least through its Peugeot brand, has raised the level of the quality of its mass market vehicles. Its new small SUV, the 3008, won the European Car of the Year Award, not least because of its striking good looks and premium interior. It latest and bigger SUV, the 5008, is also getting decent reviews in the media. But most observers seem to think that PSA’s lead scout for the U.S. market will be a DS model. This is the attempt by PSA to challenge the German premium manufacturers.

It could use new markets for this project.

According to investment researcher Evercore ISI, DS brand has struggled, with sales falling from under 120,000 in 2014 to about 63,000 in 2017.

“PSA is targeting 273,000 in 2021, with sales boosted by a major rollout of new products. We think PSA may struggle to meet this target unless the DS brand can take off significantly in China,” Evercore ISI analyst Arndt Ellinghorst said.

Perhaps the U.S. could provide a boost for DS.
PSA has made remarkable progress since its 2014 bailout. It astonished investors with a first half 2017 adjusted operating margin of 7.3% in its core automotive division.

PSA has fought back from the brink of bankruptcy and was saved by a $3.2 billion state-backed rescue plan after racking up more than $7.4 billion in losses over a couple of years. France and Chinese carmaker Dongfeng each bought 14% of the company in 2014. The Peugeot family stake was reduced to 14%.


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