Global sales dip in May

Groupe PSA's global light-vehicle sales have fallen during May. According to data released by the French OEM, demand fell by 0.5% year on year (y/y) to 258,000 units during the month. This has resulted in a slide in its year-to-date (YTD) performance of around 0.4% y/y, with sales now standing at 1,218,500 units.

On a brand by brand basis, sales of its main brands recorded differing performances. The larger Peugeot brand increased 2.2% y/y to 148,200 units while Citroën contracted by 3.5% y/y to 101,700 units. The DS Automobiles brand also fell by 8.6% y/y to 8,100 units.

On a regional basis, its performance in Europe continues to shine. In an area comprising the European Union (EU), European Free Trade Area (EFTA), Albania, Bosnia and Herzegovina, Croatia, Kosovo, the Former Yugoslav Republic (FYR) Macedonia, Montenegro, and Serbia, sales have grown by 10.3% y/y during the month to 179,000 units. All three brands recorded some degree of gains; although Peugeot achieved both the biggest sales of 103,700 units, and the biggest percentage rise, at 13.4% y/y.

Another market where gains have been recorded is Latin America, although these have moderated compared to earlier months. Demand in this market has increased by 7.8% y/y to 13,900 units, on the contrasting fortunes of its core brands. As Peugeot increased by 19.0% y/y to 9,200 units, Citroën tumbled fell by 8.2% y/y. Nevertheless, the earlier performance in this market remains in evidence as the overall gains of the OEM in the YTD stand at 18.7% y/y at 72,200 units. Stronger improvement has also been recorded in Eurasia which is up by 15.8% y/y to 3,800 units, as Peugeot's sales jumped by a quarter.

However, there remain a weakness in its second-largest market, China-South East Asia. Declines continued for the fifth month in succession as sales tumbled by 23.9% y/y to 48,900 units. This has been caused by similar scale contractions at both the Peugeot (-23.3% y/y) and Citroën (-22.9% y/y) brands. The DS Automobiles brand also slumped against as it fell 46.9% y/y.

Other regional declines for PSA this quarter included the Middle East-Africa, where sales fell 22.3% y/y to 12,700 units as Peugeot recorded a contraction of 24.3% while Citroën fell by 21.6%. The India-Pacific market reported a milder 10.8% y/y fall to around 1,600 units.

PSA confirms new Citroën model for Rennes

The automaker has also announced that a new Citroën model, codenamed C84, will be built at its Rennes (France) site. According to a statement, this will be a "market-winning" model based on PSA's EMP2 platform that was originally planned to be built outside Europe. However, the company said that the decision reflected "the performance measures taken by the plant and the commitments made to upgrade operations" including the use of flexible manufacturing processes. It has also been supported by a new labour agreement signed by five of the group’s six trade unions representing more than 80% of employees, which will come into force on 1 January 2017. The decision will require investment of around EUR100 million (USD113.4 million) which will begin in early 2017 and will be completed during 2018, and is expected to help lift production from 60,000 units per annum (upa) to 100,000 upa, helped by the second-generation Peugeot 5008 and the Citroën E-Mehari.

Outlook and implications

The latest data underline the need for PSA to develop its footprint globally which has been planned as part of its latest strategic plan. Although growth in China had been important to supporting the automaker's performance in the past, the weakness that has been recently seen has been a substantial drag. Indeed, it is somewhat ironic that it has been its recent performance in Europe that has helped to offset this situation. However, its situation in China has been compounded by a lack of new models of late, and this is something which should be remedied soon with the launches that took place at the Beijing Motor Show (China) in April. This saw the introduction of the new Peugeot 308 sedan and restyled 3008; Citroën C6 premium sedan; and new DS 4S hatchback. Furthermore, its strategy over the next six years will introduce around 20 new models. Supporting this will be additional capacity from a fourth plant run by its joint venture (JV), Dongfeng Peugeot Citroën Automobiles while the pair are also enhancing their collaboration in technical aspects. Nevertheless, like other global automakers, it may also be currently suffering from the growing pressure coming from local OEMs which could well continue.

PSA will also undertake a product offensive outside China during the next couple of years. This will include the replacement of the Peugeot 3008 crossover, B-segment Citroën C3, and the Peugeot Expert/Citroën Jumpy light commercial vehicle (LCV). The new Citroën to be built at Rennes will be part of this as well, joining the next generation 5008 which is expected to shift from the multi-purpose vehicle (MPV) category to compact crossover in line with market trends. It is expected that project C84 will be of the same ilk, further adding to the automaker's appeal in this category, albeit with a Citroën spin as PSA seeks to make it the company's "people-minded" brand with a focus on comfort. IHS Automotive expects combined production of the three vehicles to easily surpass the 100,0000-unit level during 2019 and will continue to do so almost through the life of these vehicles.

Along with additions from the DS Automobiles brand, PSA intends to launch 26 new passenger cars and eight new LCVs by 2021, including a new one-tonne pick-up. Ultimately, this will lead to the launch of "one new car, per region, per brand, per year" and an average vehicle age in its fleet of 3.5 years by 2018. 

Furthermore, it plans to increase its presence in international markets where it is already present, as well as deepening its involvement in South America and Association of Southeast Asian Nations (ASEAN). There are plans to enter India, and the North American market is also on the cards for an entry, although this looks set to be a slow process with a lead time of up to a decade.

In the short term, IHS Automotive expects PSA sales to be relatively flat this year, growing by around 0.2% y/y to 2.93 million units. However, we expect sales to rise the following year to over 3.05 million units. We also currently anticipate that gains to continue until the end of the decade, at which point it is expected to hit 3.45 million units.

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