Peugeot/Citroën’s European D-sector sales collapse is not the catastrophe it first appears.
As we know, the motor industry is riven with contradiction, but nevertheless, some things remain beyond debate. Take the fact that the European mid-sized saloon market has been in serious and (some say) terminal decline since 2007, with sales across the sector falling by half. Yet, with Europe-wide volumes of almost half a million cars last year, there still remains a good deal to play for in what’s left of the segment. This month, PSA Groupe have posted their first profits in three years on the back of vast and painful cost-cutting including the axing of unprofitable models. So today we ask where this hollowing out has left PSA’s mid-sized saloon offerings?
Citroën’s C5 has been around in its current form since 2009 – when they sold over 81,000 examples. Last year however, C5 sales in Europe collapsed to a mere 18,060. That’s a 27% drop on 2013 alone; a sobering 78% over five years. Citroën could be looking at selling maybe 15,000 this year in Europe – given a following wind. But what does the C5 offer now? Even Citroën themselves don’t appear to be sure. A slightly more resolved Peugeot 407 with the option (on some models) of hydropneumatic suspension isn’t much to lure buyers not already wedded to the concept of a not quite Peugeot, not quite Renault, but not quite Citroën either. The chances of the C5 being replaced are negligible; and with volumes like these, they’d be mad to.
Citroën of course don’t have to, having delicately placed all their Fabergé eggs in the DS basket; the DS5 being cheaper to make (no pesky hydropneumatics), yet commanding a higher showroom price by dint of its upmarket positioning. Nevertheless, Citroën can hardly be thrilled by the fact that European DS5 sales too have fallen 35% to 12,569 last year, which does seem to suggest that watchband upholstery, tacky plastics and a rock-solid ride will only take you so far in a savagely competitive market.
Stablemate Peugeot’s 508 model hasn’t exactly set the sales charts alight either. Launched in 2010, sales held a steady 80,000 per annum for the first two years. Last year these numbers halved with a mere 41,797 sold. The 508 was an attempt to return to the solid middle-class values that endeared generations of Peugeot 504’s and 505’s to loyal owners from Navan to Nairobi. Recently restyled, the 508 still falls flat, coming across as a poorly executed slab of automotive rectitude, (and akin to its DS cousin), lacking the material quality to back up its assertions. Too many rivals learned to do this kind of thing far more convincingly while Peugeot were attempting to convince us all to ‘Drivesexy’ a couple of years ago.
While not the whole cause, these figures are illustrative of PSA’s current (and ongoing) financial meltdown. Within the space of three years they have gone from selling 145,373 segment-D Peugeot’s and Citroën’s to 72,426 across Europe last year.
A drop of this magnitude should be cause for all manner of hand-wringing and recrimination, but there is a one-word reason these figures are not as catastrophic as they appear: China. PSA now sell more C5’s, DS’ and 508s in China than they do in their home market, with total sales of over 700,000 vehicles there last year. So instead of heavily discounting slow selling saloons to uninterested Europeans, production has been diverted east, where demand remains surprisingly strong. While this is very good news (and smart practice) it’s a mixed blessing for the Chinese, who have to put up with PSA’s idea of build integrity. PSA hope to sell 850,000 vehicles there in 2015, with a projected 1.5 million deliveries by 2020.
Furthermore, Peugeot have built themselves a significant market in Iran, where more than 100,000 405 models were produced last year. A model line by the way that has sold in excess of 6 million units in its 27 years. Who says they don’t make ’em like they used to? Although one has to hope they don’t – given the 405’s legendarily awful interior quality.
With analysts now suggesting the D-sector’s European decline has finally levelled out, what hope remains of salvaging PSA’s share of a European market now half its original size? With strong Chinese demand, PSA could be better placed than some mainstream rivals – especially Renault, who on the surface of things have recovered faster. PSA’s recent profits have surprised analysts, who remain guarded upon the group’s longer-term prospects. Despite their recent success in China, they remain heavily dependent upon a weak European market, face costly restructuring in Latin America and a sharply declining Russia.
The share of the D-segment PSA have lost in Europe is gone for good. Facing a smaller, yet more competitive market, PSA need to rethink what the European buyer wants from them. The 508 will be replaced – which is more that can be said for the hapless C5. But have they the ability to craft a convincing mid-sized contender(s) that can further their push into China while appealing to European buyers who have lost all appetite for PSA’s rather slapdash approach to production engineering? Securing the volume and profitability they need without recourse to another ill-judged stab at America relies upon Tavares getting a multitude of strategic decisions right. Maintaining a viable presence in the D-sector is only one of them, but it would be a good start.
Data/source: Left-Lane.com/ANDC/JATO Dynamics/Automotive News Europe
Driven To Write 
The problem with the C5 is that it’s perfectly OK. It looks alright. It drives alright in steel springed form though, by most accounts, don’t bother with the hydraulic version which sounds as though it has been engineered specifically to prove that Citroens don’t need fancy expensive suspensions any more. If you worked for a company that only bought Citroens and you were given one, or if for convenience you only purchase from the garage round the corner who happen to be a Citroen dealership, you’d have little reasonable cause for complaint. But other than that, who would buy one when there are the usual suspects around – Mondeo, Passat, 3 Series, etc? The same goes for the 508. In trying so hard to be like everyone else, they have ensured that everyone else will get their customers.
I see parallels with Opel here. Opel is also dependent on the Chinese market but luckily their car (not on Sean´s list) is a lot better than the C5 as getting customers. While I have been critical of Peugeot I don´t think their quality is quite a rough as Eoin is implying. It might not be stellar but it´s not shocking. While it´s okay for PSA to have their fire escape in place, they really ought to avoid ceding this whole sector to everyone else. What next? Could it be that in a decade we are writing wistful artices about how the 308´s successor is an also ran? Peugeot´s problem is not in engineering or design. It´s management, management, management. These are the people who decide what to prioritise and what the vision is. I am very confident that I could articulate a convincing vision of a Peugeot better than they could and the engineers and designers could execute it. The 508 is what the chiefs in PSA wanted it to be. They were wrong.
It’s true that, back when Peugeot were busy stifling Citroen’s creativity, they could point to their sales and profits and say ‘we know what we’re doing’. Back then there were good yet conservative business heads, working with highly creative yet conservative engineers. Unfortunately, in putting quality low on the priority list, they were sowing the seeds of their later problems. I’ve run PSA Citroens and Peugeots in the past, but the excellence of their design and behaviour was offset by their general shabby quality. As such, I view PSA as a bunch of skinflints, architects of their own woes, I feel no practical loyalty towards either brand, save a sadly tinged nostalgia.
A few days ago, a local shopping centre had a display of new Peugeot’s in their atrium. A 108, a 2008 & a 308. As I passed by it occurred to me, why would anyone choose one of these over their rivals? They all looked okay, in the way contemporary Peugeot’s do, but no more than okay really. The 308 costs over €20,000, which seems a lot, but is probably about the norm for the class. A Golf could be purchased for similar money, or if Claudia hasn’t put you off for life; an Opel Astra. Both make more sense. Neither suffer from unresolved frontal styling, nor in the case of the Ford Focus; unresolved rear styling. The Golf will hold its value better. Something like a Kia makes for an even more pragmatic choice. PSA have a hell of a lot of work to do.
Hmm, I tend to disagree. The 308 really is competitive: Good engines, enough interior space (especially in the boot), lightweight, drives ok. I agree with the front styling, but the back is really good and the proportions are right. If I were to buy a new C segment car, I’d choose the 308 (or maybe the Mazda 3).
And what exactly is wrong with the 508? Don’t get it.
What is wrong with the 508? The rear lamps sag. They needed to be alligned along a horizontal plane. The front is alright and by the time we get to the side we see a high waistline and a tiny DLO and the impression is a mix of other people´s ideas of a middle market car. It looks heavy without being dignified. The detailing is insecure: an invisible “Peugeot” label hidden on the chrome grille surround under the badge on the bonnet that means the same thing. There is a version with no brightwork on the side glass (acceptable) chrome on the side glass ledge (sensible) and with a full brightwork frame (logical) but also one with brightwork on the upper edges of the DLO where it is only decorative. That version sells a lot and I hate it for its idiotic semantics. The interiors are dark and gloomy and unspecial. True, nearly nobody makes anything other than a coal hole these days but Peugeot´s is especially oppressive. And finally, it is ordinary to drive. Peugeot´s USP was superb ride quality. They made their own dampers and were the equal of Jaguar and Mercedes and Citroen. Now they are not.