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