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PSA may buy Opel/Vauxhall, but does it make sense? [w/poll]

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Peugeot-Opel-logoThis week it became apparent that PSA Peugeot-Citroën and General Motors are having talks about the possible takeover of GM’s European division by the French automaker. This includes the Opel and Vauxhall brands, which have been a decade-long money drain on General Motors. The two automakers have been working together closely on the development of a handful of models and are looking for opportunities to boost each company’s profitability, which includes a sale of the two brands. GM has had a stake in PSA until 2013 when it became apparent that projected savings from their cooperation and platform sharing would fall short of expectations. After this breakup, the French company had to be bailed out by the French government and its Chinese partner Dongfeng Motor, which each control 14% of the shares.

Would a new, more intense cooperation bring the promised synergies? And does this mark the start of a much-needed wave of consolidations in the European car market? Or will it only cause PSA to lose focus on its own financial recovery and resurrection of its brands? Let’s look a the pros and cons for both parties involved:

Opel-Citroen-logo [Read more…]

For China with Love! | Global Brand China-only Cars You Probably Never Heard About

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By Jean-Philippe Launberg, and in partnership with Escopo Automotivo.

Months ago I wrote about China’s domestic OEMs fast evolving automotive design capabilities (see Chinese Cars: Just Copycats?).

This time I want to highlight another developing aspect of the Chinese market: foreign brands are now frequently designing cars exclusively for the China. This is an expensive practice, but one that is justified by the market size, particular tastes of (some) Chinese customers, and the business dynamics between these brands and their local joint-venture partners. As an example, the domestic Compact Car segment is so large, that by itself it would rank among the 5 largest car markets in the world. This means automakers have to cater to large and diverse customer groups; hence the opportunity for several models from individual brands to effectively compete in it.

Love China 3

One may start thinking of how some of the China-exclusive models might fare if exported or produced abroad, which is exactly the point I would like to open for debate today. Certainly it would be no hardship to export into Emerging Markets; China’s regulations, environmental and usage requirements are as strict ― or stricter ― than most, so changes would be few and small in scope (with the exception of right-hand drive conversions). For Developed Markets, some extra engineering might be required to comply with safety regulations and requirements, but since many of the China-unique models are based on global platforms, it should be quite feasible. I suspect the greatest challenge is that these models are Made-in-China, which is a pity as the design, development philosophy and practices, as well as the quality and sophistication of tools and equipment are far more important than the country of manufacture. Chinese plants, for example, are among the newest in the world, and well-equipped given the massive recent investment. It’s a pity potential international customers are still locked in the old paradigm, but perceptions do matter. I have no qualms about buying a Chinese-made BMW, Honda, etc. I would even seriously consider some of the latest domestic brand products from Geely, BYD, Haval, Roewe and others.

Moving on, here are some interesting foreign brand ― in alphabetical order, not importance ― models made exclusively (at least so far) in China and for China. Let us know, by commenting, if you believe any of them would have appeal outside of China. [Read more…]

Peugeot trimming its line-up a smart move?

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PSA-Peugeot-Citroen-CEO-Carlos_TavaresUnlike many other brands, which are adding models to fill up every possible niche, Peugeot has changed its strategy to focus on fewer models, and focusing on segments in which the brand can compete successfully across the globe, increasing economies of scale. Carlos Tavares, the new CEO of PSA Peugeot-Citroën who is responsible for bringing the company back into profitable territory, has outlined a number of strategies to turn the company around, and one of them is to increase transaction prices.

This strategy is designed to evolve Peugeot from a regular mainstream brand into an upper-class mainstream brand, to avoid the buzz-word “premium”, as every mainstream manufacturer appears to be aiming for a premium image. Tavares wants to be able to raise transaction prices of Peugeot cars in Europe to match those of its competitor Volkswagen, whereas they are trailing the German brand by almost 7%. His aim is to decrease this deficit to 4,7% in 2016 and to less than 3% in 2020. These increased prices should contribute directly to the company’s bottom line, as production costs remain at a similar level. According to Tavares, the technology and quality of the 208 subcompact, 2008 small crossover and 308 compact are already on par with Volkswagen’s and therefore help improve the Peugeot brand image. [Read more…]

What should General Motors do with Opel and Vauxhall in Europe?

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Opel-logoGeneral Motors has a problem in Europe. The world’s second largest automaker European Opel brand (named Vauxhall in the UK) is losing money faster than drunk guy in a strip club.

For decades, Opel has been GMs European bread-and-butter brand, competing with Ford, Peugeot, and Volkswagen for the likes of families looking for safe and comfortable, non-pretentious transportation. But the European car market has shifted away from the middle-of-the-road brands, and unless you’re a premium or low-cost brand, you’re in trouble, especially without any chance of growing your volume outside of Europe. Several competitors have come up with different strategies to cope with this reality.

Should Opel follow any of these strategies?

Volkswagen strategy

Volkswagen reacted to the rise of (mostly South-Korean) budget competition by moving its core VW brand more upmarket by introducing more advanced technology, better individualization options and more luxurious interiors, with some help from its premium Audi brand, meanwhile re-introducing Skoda as a budget competitor for price sensitive customers.

But it’s extremely difficult to move a mainstream brand like Opel upmarket into (semi)premium territory, and it will take huge investments into technology, design and marketing. Money that GM is not willing to spend on a “local brand” like Opel, especially one that has already lost an unimaginable $ 18 Billion in the past 12 years. And it will also take a lot of time, at least a few decades, to get the new, higher-end image into the minds of consumers. Time the brand doesn’t have, with stockholders breathing down GMs neck, looking for it to focus on high-growth markets and brands, offering a quick return on investment. Arguably, VW isn’t quite there yet either. [Read more…]

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