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Following the "marriage" with Dongfeng in March of this year, the PSA (Peugeot-Citroen Group), the largest car group in France, has finally returned strongly at its "home" - Paris International Motor Show. The PSAs with the participation of Peugeot, Citroën, DS and the three major brands exhibited a significant increase in momentum and in previous years both in the area of ​​the booth and on the participating vehicles.
In fact, compared with the models released by the PSA, the industry is more concerned with whether the PSA has emerged from its predicament after the “marriage†of the Dongfeng. In response, PSA Global CEO Carlos Tavares said in an interview with a reporter from the China Business News: “We now have enough cash flow and self-financing capabilities, and the company’s profitability will continue to increase. The current automotive sector is approaching. Balance of payments, and the group as a whole achieved a business profit of 60 million euros in the first half of this year, indicating that PSA is moving in a good direction."
This is exactly where PSA’s momentum in the Paris International Motor Show is soaring. Dongfeng's 800 million euro "gift" has certainly solved PSA's urgent needs, but for Tang Weishi, Dongfeng is more critical to the development of PSA in China. Because "the Chinese market can help companies achieve success, and Dongfeng can play an important role in promoting the success of PSA in the Chinese market."
Deep reflection
A few days ago, PSA's three major brands, Peugeot, Citroen, and DS, jointly "combat" and set off a real "French style" at the Paris International Auto Show. It's hard to imagine that the models at the auto show are gathering. PSA is currently working on a "slimming down" operation: cutting down on its products. Although this approach is likely to lead to a decline in PSA's market share in some regions and countries, the PSA, which has just eased funding pressures, is still insisting on streamlining its product line.
"Our strategy is to concentrate on superior technologies and build core products, which means that the future PSA's products will be more globalized, and at the same time pay more attention to local market demand. Only in this way can we make products more efficient in design and manufacturing, and at the same time It is also possible to concentrate more manpower and material resources on the key models so that the manufactured products will better cover various market segments.†Tang Weishi told reporters that despite the fact that the PSA had a total of 45 models in the previous two years, the company’s The business situation is still not satisfactory. Therefore, in the stage of the 2014-2018 stage development strategy “BackintheRace†announced in April this year, it is proposed to gradually reduce its product line to 26 models.
Reflections such as "fleshing" are not limited to products. Since Tang Weishi took office on January 1st this year, his proposed rejuvenation plan has focused on reflection. In his opinion, 26 models have enough coverage in all market segments, and in importance, there is no distinction between subdivided models. But in the regional market, where is more focused on determining the future development of PSA.
“Whether in terms of sales or profits, China is one of the most important markets because the Chinese market can help companies achieve success, and of course, they can also help companies reduce their dependence on a single market.†Tang Weishi admits that PSA was too Relying on the European market, PSA encountered difficulties when the European market encountered a crisis. “So the Chinese market can promote the revival of the group on the one hand, and reduce the group’s dependence on the European market on the other hand. It can be said that PSA is now Walking on two legs, one leg is Europe, the other leg is China."
Seeking a win-win situation
The "Towards Revival" strategy has achieved remarkable results since its publication. It is reported that the current cash flow of PSA has reached 1.5 billion euros, and the automotive sector is close to breaking even. Although PSA did not disclose the contribution of the Chinese market in this data, it is not difficult to speculate from Tang Weishi’s continuous emphasis on “the Chinese market has far surpassed the French mainland and becomes the PSA’s largest market in the worldâ€. PSA's emphasis on the Chinese market Reliance may have exceeded the European market.
“The cooperation between PSA and Dongfeng has been going through for a long time and we understand each other very well, so Dongfeng can play an important and key role in promoting the success of PSA in the Chinese market.†Tang Weishi said that Dongfeng acquired PSA in March this year. After the 14% stake, the two sides have a more special relationship: Dongfeng's PSA is both a partner and a shareholder.
This means that the two have more responsibilities and obligations to promote each other's development.
From the perspective of PSA, on the one hand, Dongfeng clearly has a more thorough understanding of the trends in the Chinese market, consumer demand, and business expansion in China, and can guide the development of PSA in China in the right direction; On the other hand, PSA also hopes to seize more opportunities with Dongfeng, especially in emerging markets such as Southeast Asia. PSA hopes to use Dongfeng's understanding of these markets to better promote its business expansion in Asia.
From the perspective of Dongfeng, PSA with a long history has more professional experience in product technology, platforms, etc., and can provide platform, technology, and framework for the development of its own brand.
Thanks to the strong performance of the Chinese market in the past six months and the confidence of the “marriage†with Dongfeng, PSA said that this year it is expected to exceed 700,000 units in sales in 2013 based on the 550,000 units.
Revival considerations
“The cooperation between PSA and Dongfeng has been performing well since last year. The increase in sales in the Chinese market also means that PSA’s market share is increasing at the same time. However, we also face many challenges, such as how to better highlight the brand value of the product. In order to improve pricing power, and how to increase production efficiency, etc.†Tang Weishi told reporters that in addition to meeting these challenges, PSA will also pay more attention to and understand the needs of Chinese consumers in order to further adapt this product to this market.
In fact, at the beginning of Tang Weishi’s blueprint for “Towards Rejuvenation†for PSA, the Chinese market has become the top priority of this strategy. Judging from the current situation, despite the implementation of only half a year, the preliminary results of the “Towards Revival†strategy have become very clear: In the first half of the year, the auto sector achieved profitability and free cash flow reached 1.5 billion euros.
According to PSA's plan, by 2018, the total free cash flow of the Group's operations will reach 2 billion euros, and the operating margin of the automotive sector will be increased to 2%.
Although the current development of PSA is basically within the planning track, it is not entirely risk-free. On the one hand, PSA's current performance in the European market still largely influences the overall development of PSA. At this point, the “China†market is basically powerless; on the other hand, the PSA has a bearing on the Chinese market. The demand is self-evident, but the performance of French cars in the Chinese market has always been flat. The development of Shenlong Automobile is also vulnerable to the influence of the environment. As for the DS brand, the time to enter the country is still short, and the sales and profit contribution rate Far less than Shenlong Motors.
Based on this, it is still unknown whether PSA can fully “go to recovery†by 2018.
Painful thinking PSA rejuvenation in China