PSA: Achieved 2021 operating margin target ahead of schedule, shifting to an aggressive stance

New plants to be constructed in Morocco, India, and the ASEAN region

2017/06/01

Summary

Citroen C3
The uniquely designed Citroen C3, released in November 2016. (Photo: PSA)

  PSA was enacting its 2014-2018 "Back in the race" mid-term plan, but having achieved its intended management reconstruction by ending 2015 in the black among other successes, the OEM announced its new 2016-2021 "Push to Pass" mid-term plan in April 2016. PSA has switched over to an aggressive stance, with plans to release 34 new models in 5 years and an aim to achieve organic, profitable growth.

  With its new mid-term plan, PSA has set the following targets:
1. Increase revenue by 10% over 2015 results by 2018, and 15% more by 2021 (approximately EUR 68 billion)
2. Maintain an average operating margin of 4% from 2016 to 2018 for its automotive division, and raise it to 6% by 2021

  The automaker is off to a strong start as it achieved its goal of a 6% operating margin ahead of schedule in 2016. In the same year, PSA's global vehicle sales increased by 5.8% to 3.15 million vehicles. Although its revenue decreased by 1.2% (EUR 54 billion), excluding the impact of exchange rate fluctuations, the OEM actually increased its revenue by 2.1%.

  As for its global activities, thanks to its steady reentry into the Iranian market, sales in the Middle East and Africa have rapidly increased from 180,000 vehicles in 2015 to 384,000 in 2016, and the automaker is currently constructing a new plant in Morocco. It also plans to construct new plants in India and a yet undisclosed country in the ASEAN region.

  Although the automaker withdrew from the North American market in 1991, starting in 2017, it will enter the new mobility market (car sharing business) and consider means to fully reenter the North American market in its 10-year long-term plan.

  In March 2017, possibly due to its increased profitability, PSA announced it would acquire GM's European subsidiary Opel, and incorporate it in its "Push to Pass" growth strategy. This acquisition will push PSA's market share in Europe to second place after VW. The above-mentioned figures will also be overwritten, and will be covered in a separate report.


Related report:
PSA: improved performance through European sales and cost cuts (January 2016)

LMC Automotive
LMCA Client Alert: Analysis of the proposed acquisition of Opel by PSA (February 2017)