French automakers Peugeot and Renault Drive Up German Sales

The French firms Peugeot and Renault have both had successful years in the German market and are now fighting it out to become the biggest exporter of cars to the country.
Quelle: Bloomberg
Peugeot saw its German sales bounce back in 2016.

A few years ago a Peugeot boss told Handelsblatt that the French carmaker was no match for Germany’s leading automakers.

But today, Jean-Philippe Imparato, the Peugeot brand’s chief executive, is dismissive of such defeatism. He’s been in the job for four months and has big plans. “With the new 3008 we’re moving into the segment of German brands, taking on the VW Tiguan and the BMW X2,” he told Handelsblatt. He wants the firm to become “the best mass supplier in the high-end segment.”

The medium-sized 3008 SUV was launched in October and is selling well. Peugeot says 60,000 orders in the first three months beat expectations by 70 per cent. Mr Imparato is also especially pleased about the prices achieved. He says they range from €30,000 ($32,000) to €42,000, driving up profit. “Our aim was to reach 20 per cent of the profit with 15 per cent of the sales,” says the brand head. He adds that they’re already above that with a share of 20 to 25 per cent of the margin.

In March, Peugeot will add the big 5008 SUV to the range. Both models are part of a strategy to penetrate especially profitable market segments. Until recently Peugeot lacked attractive SUV and crossover models. Hence it couldn’t profit last year from the strong market growth in Europe and was even overtaken in sales by arch-rival Renault.

Renault has just announced another record year in Germany. Including sales of its low-cost Dacia brand, it sold about 175,400 vehicles in the country in 2016 – up 12.2 per cent on the previous year and making it the biggest exporter of cars to Germany.

In technical and design quality Peugeot could now match the German premium brands.

In 2016, the French motor industry went through ups and downs. As well as a few successes, Peugeot, Citroën and DS  – the core brands of the parent PSA Group – had to cope with some harsh setbacks, shown by sales numbers presented on Wednesday.

A positive is that for the first time since its survival-threatening crisis PSA was able to sell more than 3 million vehicles worldwide. The biggest driver of this growth was the resumption of trade with Iran. After sanctions ended last year, production and sales were restarted there.

But a painful setback has been the drop in sales in China and Southeast Asia. Mr Imparato, who worked in China for a few years, has a convincing explanation. He doesn’t put it down to unsuitable products or wrong pricing, but primarily to a weak dealer network. “We have around 500 dealers, which is not enough if you want to grow strongly in the market.”

The currently high real-estate prices are making it hard to grow the network. But that will happen this year, and sales will pick up again as well, Mr Imparato predicts. “This year we’ll sell more than 400,000 units again.”

Where does he see his brand compared to the German competition now? At price level they’re equal with VW, he says. Peugeot no longer needs to be cheaper to push its cars into the German market. Mr. Imparato even says he consciously avoids special offers or sales gimmicks. That could increase sales short-term, he explains, but would weaken the margin. In technical and design quality Peugeot could now match the German premium brands. From model to model and country to country the rivals vary, he says.

The positioning of the Peugeot brand has undergone several changes. The Citroën models used to be the jaunty low-priced ones in the company, the Peugeots the dignified high-priced models. Then everything changed with the Citroën DS line. PSA chief Carlos Tavares formed the third brand to establish the group in the luxury segment. But there has been one small problem: the cars are beautiful but don’t sell and are outdated.

The rise of DS made Peugeot‘s brand positioning more complicated. Mr. Imparato can’t comment on DS but makes his point in a roundabout way: “I keep it very simple; I’m a mass supplier but in the high-end segment, and I don’t mind chasing a few premium suppliers there.”

Apart from margin targets, it’s important to him to drive internationalization. “In 2020 we want to sell every second car abroad,” he says. Peugeot suffered for a long time from being too dependent on the French market. Nearly all its production happened there, driving up costs, and in the final analysis also caused the crisis. But in 2016 Peugeot managed to grow the external proportion from 38 per cent to 42 per cent.

Recently PSA agreed a new deal with its trade unions. Employees again accepted greater assignment flexibility and cost-cutting measures. In return, the firm promised a greater utilization of its plants. Because costs have been cut, Peugeot can now also produce profitably in France and aggressively push the “Made in France” label.

Meanwhile, domestic rival Renault is upping its game when it comes to competing with Peugeot in the German market. At his traditional end-of-year presentation Renault-Germany’s chief Uwe Hochgeschurtz was able to report the best growth in six years.

As well as the 175,400 Renault and Dacia passenger cars it sold in the country in 2016, it also shifted 23,100 commercial vehicles.

Overall Renault is growing twice as fast as the market and has raised its share in Germany to almost 5.5 per cent.

That again makes Germany the second most important market for the French in Europe. And when Dacia sales are included, even allows Renault to call itself the “biggest importer” of cars into Germany.

With a comparatively young range of models, Renault wants to grow at twice the market rate again this year. To help drive that are new models like the big Koleos SUV and the Alaskan pickup, as well as the reworked Captur.

The firm’s financial figures in Germany are not disclosed, but Mr. Hochgeschurtz hints that it was a “satisfactory” year, with every car, including electric ones, returning a profit.

The electric range has developed extraordinarily well, even though its share of sales is still small. With 3,900 new registrations, the French profited most from the German government’s financial support for the purchase of electric cars. Sales of purely electric cars rose by 56.5 per cent. Renault’s Zoe was the biggest-selling electric model in Germany. The reworked battery drives the Zoe for up to 400 kilometres (250 miles).

Renault’s best seller remains the small Clio. The 24,600 registrations were 9.7 per cent up on the previous year. Even greater growth was achieved by the compact Captur SUV, which with 21,300 vehicles sold (up 30.7 per cent) can hold its top position for compact off-road vehicles.

After a mixed year, Dacia is also back on track in Germany. With growth of 7.4 per cent, the Romanian subsidiary grew faster than the market.

 

Thomas Hanke is Handelsblatt's correspondent in Paris. Lukas Bay is an editor with Handelsblatt's companies and markets desk. To contact the authors: [email protected], [email protected]