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)



Announcement of the new 2016-2021 mid-term plan "Push to Pass" (April 2016)

Push
to Pass
PSA will provide a full set of services in its "Push to Pass" mid-term plan, and expand its customer base. (Source: PSA)

  In 2012 when it was in the midst of a management crisis, PSA announced it would shut down its Aulnay Plant in France and reduce its number of employees by 8,000 people. However, thanks to restructuring and the recovery of the European market, the OEM turned a profit for the first time in four years in 2015.

  PSA announced it has completed its restructuring and will switch to an aggressive management policy. It also unveiled its new 2016-2021 mid-term plan, Push to Pass, in April 2016. In its Back in the race mid-term plan, the automaker pursued operational excellence, but in its "Push to Pass" plan, it will pursue organic, profitable growth.

  Additionally, the automaker changed its name from PSA Peugeot Citroen to PSA Groupe, which equally represents the three brands in the group: Peugeot, Citroen, and DS. Furthermore, the OEM plans to spend the next twenty years developing DS into a premium brand that can compete with Audi, BMW, and Mercedes.

  By 2021 PSA plans to release 26 passenger vehicles and 8 commercial vehicles (including pick-up truck) for a total of 34 new models, including facelifted models and electrified vehicles. In 2018, the OEM plans to increase its revenue by 10% over 2015 results and further raise revenue 15% by 2021. The OEM also aims to increase the recurring operating margin of its automotive division to 6% by 2021.

  At the same time, the automaker will work to provide a full set of services encompassing areas such as new mobility and leases, as well as after-sales services and sales of used vehicles not limited to its own brands in order to expand its customer base, marking a shift from a product-oriented strategy to a consumer-oriented one.

Peugeot Instinct Concept
The Peugeot Instinct Concept, featuring a shooting-brake design and futuristic autonomous driving technology (Geneva Motor Show 2017)

2016-2021 mid-term plan Push to Pass

Purpose A great carmaker
  Become a great carmaker that features advanced efficiency (quality, costs, and platform strategy).
A mobility provider
  Become a globally accepted and loved mobility provider and establish a life-long relationship with customers.
Target indicators Group revenue   Increase revenue by 10% in 2018 over 2015, further increased by 15% in 2021 over 2015. (Aim for an annual average growth of 3.2% from 2016 to 2018, and 4.4% from 2019 to 2021)
Automotive Recurring operating margin   PSA's initial target was to achieve an average operating margin of 4% from 2016 to 2018, and aim for 6% by 2021. Because the OEM achieved its 6% target in 2016, it has raised its target from 2016 to 2018 to 4.5% or more.

"A great car maker"

New model launch Passenger cars   Release 26 new models by 2021.
Commercial vehicles   Release 8 new models by 2021. Also release a 1-ton pickup truck (jointly developed with Toyota based on the Hilux).
Electrified vehicle   (Internal numbers of the above total 34 new models) 7 PHV models based on C/D segment gasoline vehicles, and 4 next-generation B/C segment EV models will be released from 2019 to 2021.
Total of 121 models   Every year, the three brands will release at least one new model in various regions (later mentioned in the results of unit sales) for a total of 121 models when also calculating regional releases.
Core technology Quality & service   Provide top-class quality and outstanding service to increase customer satisfaction
Advanced technology   Motorization and development of ADAS and autonomous driving technology. Realization of wireless data and software transmissions.

"A mobility provider"

Purpose: Enlarge customer base with a full set of services
New Mobility services   Provide services such as car sharing and fleet management for corporate users. As a foundation for such services, PSA has collaborated with IBM regarding the handling of big data. The OEM aims for annual revenues of EUR 300 million in this field by 2021.
Multi-brand after-market sales, and so on   Provide multi-brand services covering leases, insurance, used-car and after- market sales for customers of PSA and other OEMs.
Source: PSA Presentation 2016.4.5/FY 2016 Results (February 2017)


Model plan: Strengthen SUVs as the market for such vehicles grows in Europe

  Of its 34 new global models scheduled for release between 2016 and 2021, PSA will release the following 7 between 2016 and 2017. Among them, the Citroen C3 is a hatchback, and the Peugeot Expert/Citroen Jumpy is a commercial vehicle. The other 4 models are all SUVs as the OEM plans to strengthen its lineup of these vehicle to take advantage of the current expansion in market share they are enjoying in the European market.

Peugeot 3008 SUV
The Peugeot 3008 SUV, awarded the "European Car of the Year 2017" (Geneva Motor Show 2017)
Citroen C Aircross
The Citroen C Aircross, scheduled for release in the second half of 2017 (Geneva Motor Show 2017)

7 new models scheduled for release between 2016 and 2017 (from among the 34 new models)

Peugeot Expert/Citroen Jumpy   Developed based on the EMP2 platform and released in June 2016 in Europe. Its sibling vehicle, the Toyota Proace Van, was also released at the same time.
Peugeot 5008   Updated to a seven-seat SUV from the previous MPV version. The 5008 is a SUV that is one size larger than the 3008.
Peugeot 3008   A compact-class SUV that was awarded the "European Car of the Year 2017" at the Geneva Motor Show 2017.
Citroen C3   The new Citroen C3, with its unique styling (see photo above), was released in November 2016. Prices start at EUR 10,995.
C-SUV   Although the model name has not been announced, it is believed to be the Citroen C5 Aircross or the DS 7 Crossback, sibling vehicles to the Peugeot 3008.
B-SUV   The Citroen C Aircross that was exhibited at the Geneva Motor Show 2017 will be released. The Aircross carries over style cues from the Citroen C3, and will serve as a successor to the C3 Picasso.
Source: PSA's FY 2016 RESULTS (February 2017)


Development of all major models including electrified vehicles on two platforms

  PSA will develop all new models based on two platforms: the EMP 2 and the CMP (featured models scheduled for release starting in 2019). The EMP 2 platform will be used for C and D segment vehicles, while the CMP platform, jointly developed with Dongfeng Motor, will be used for B and C segment vehicles.

  Thanks to a flexible modular approach that can accommodate various lengths, widths, heights, and wheelbases, all of PSA's major models can now be developed based on these two platforms, making them a crucial part of the OEM's Push to Pass strategy.

  Additionally, PHVs (C and D segment vehicles) and BEVs (B and C segment vehicles) will also be developed based on these two platforms. The OEM plans to rapidly increase its lineup of electrified vehicles from 2019.

A gasoline plug-in hybrid
conceptual diagram A next-generation battery
electric vehicle conceptual diagram
A gasoline plug-in hybrid conceptual diagram (Source: PSA) A next-generation battery electric vehicle conceptual diagram (Source: PSA)

PSA's two platforms

EMP 2   EMP stands for "Efficient Modular Platform." The platform has replaced the PF2/PF3 platform and been used in C and D segment vehicles since 2013.
  PSA will develop C and D segment PHVs based on the EMP 2 platform and plans to release them starting in 2019. The platforms will feature a drive battery with a capacity of 12-13 kWh with an aim for an EV driving range of 60 km.
CMP   CMP stands for "Common Modular Platform." The platform was jointly developed with Dongfeng Motor, with EUR 2 million invested in the project. The platform will replace the PF1 platform and be utilized on B and C segment vehicles, which are slightly smaller than models underpinned by the EMP 2 platform. Vehicles utilizing the platform are scheduled for release starting in 2019.
  Dongfeng Motor will also develop small vehicles from its own brands based on the CMP platform. The central development facility will at PSA's research center in the suburbs of Paris in Velizy, but the two companies have opened a joint development center in Shanghai for the development of Dongfeng Motor models.
  PSA will jointly develop an EV version of the CMP platform, the "e-CMP," with Dongfeng Motor. The OEM is scheduled to release 4 EV models between 2019 and 2021. The models will feature a 50 kWh battery, and will aim for a driving range of 450 km.
Source: PSA's FY 2016 Results


PSA's results: Achievement of a 6% operating margin in its automotive division in 2016

  In the three years between 2011 and 2013, PSA recorded an operating deficit, but in 2014, the OEM barely turned a profit. In 2016, it achieved its "Push to Pass" mid-term plan target for a 6% operating margin in its automotive division by 2021. Its acquisition of Opel is believed to have occurred due to the increase in profitability, leading Opel to be incorporated into the "Push to Pass" plan's growth strategy. Automotive Recurring
Operaing Income

PSA's consolidated results

(in million EUR)

2011 2012 2013 2014 2015 2016
Revenue 58,509 55,446 53,079 53,607 54,676 54,030
(O/W) Automotive 42,710 38,299 36,415 36,085 37,514 37,066
Recurring operating income 1,093 (576) (364) 905 2,733 3,235
Recurring operating margin 1.9% -1.0% -0.7% 1.7% 5.0% 6.0%
(O/W) Automotive (92) (1,504) (1,039) 63 1,871 2,225
(O/W) Automotive -0.2% -3.9% -2.8% 0.2% 5.0% 6.0%
Net income 784 (4,925) (2,227) (555) 1,202 2,149
Net income, Group share 588 (5,010) (2,327) (706) 899 1,730
Source: PSA FY2011-FY2016 RESULTS

Global vehicle sales: Global sales in 2016 grew by 5.8% to 3.15 million vehicles

  In 2016, PSA's global sales grew 5.8% year-over-year (y/y) to 3.15 million vehicles, with vehicle sales recovering to the 3 million level for the first time in 5 years. In comparison to 2013, the year in which sales dropped the most, European sales recovered by 300,000 vehicles to 1.93 million vehicles. As for the Middle East and Africa, including Iran, where PSA has reentered the market thanks to the lifting of sanctions by Western nations, sales doubled y/y, rising to 384,000 vehicles, which contributed to the OEM's increase in global sales.

  PSA is currently constructing a new plant in Morocco, and plans to also build new plants in India and a yet undisclosed ASEAN country. The automaker plans to sell 1 million vehicles in China and ASEAN in 2018 and 700,000 vehicles in the Middle East and Africa in 2021, aiming for expansion in emerging markets.

PSA's unit sales by region

(1,000 units)

2011 2012 2013 2014 2015 2016 Mid term target Number of new models
year 1,000units
Europe 2,063 1,758 1,629 1,761 1,864 1,930 -   28
Latin America 326 283 303 200 157 184 -   16
China & South-east Asia 703 779 564 742 736 618 2018 1,000 20
Middle East & Africa 227 169 180 384 2021 700 23
India Pacific 21 22 24 20 2021 30 17
Eurasia 74 44 12 10 -   17
Consolidated 3,092 2,820 2,818 2,939 2,973 3,146 -   121
Source: PSA's FY 2016 RESULTS
(Note)1. Including finished vehicles, CKD and licensed production.
2. Eurasia includes Russia, Ukraine, Belarus, and Kazakhstan.
3. Number of new models released is the number of new models released from 2016 to 2021, counted by region.

Recent trends in overseas markets

India Pacific * PSA will cooperate with the CK Birla Group and begin the production and sales of vehicles and parts in 2020. Both parties will jointly invest EUR 100 million in the project. The CK Birla Group is the parent company of Hindustan Motors.
* In February 2017, PSA acquired the Ambassador brand from Hindustan Motors.
China & ASEAN   In 2015, PSA sold 736,000 vehicles. In 2016, the OEM sold 618,000 vehicles, and will aim for 1 million in 2018.
  The alliance with Dongfeng Motor (Dongfeng Peugeot Citroen Automobile: DPCA) is proceeding smoothly as noted below:
* Joint development of a Common Modular Platform for B/C segment vehicles
* Scheduled release of B and C segment EVs based on the above platform at the end of 2019.
  Additionally, a joint venture with Changan Automobile (Changan-PSA: CAPSA) is currently producing and selling DS brand vehicles.
  By the end of 2018, PSA will cooperate with Dongfeng Motor to begin construction of a new plant in the ASEAN region.
Latin America * Starting from the second half of 2017, consigned production of LCV's Peugeot Expert and the Citroen Jumpy will begin in Uruguay.
* PSA has invested EUR 320 million in its Argentinean plant, and will begin production of new models based on the CMP platform starting in 2019.
  Vehicle sales have expanded from 157,000 vehicles (3.3% market share) in 2015 to 184,000 vehicles (3.6% market share) in 2016.
Middle East & Africa   Thanks to its re-entry into the Iranian market, sales in the Middle East and Africa have rapidly recovered from 180,000 vehicles in 2015 to 384,000 vehicles in 2016. PSA aims for sales of 700,000 vehicles in 2021.
* In Iran, Peugeot has partnered with Iran Khodro, and Citroen with SAIPA (both were partners prior to the sanctions put in place by the U.S.).
* PSA has invested EUR 557 million in constructing a new plant in Morocco, and will begin production of B/C segment vehicles in 2019. Initial production capacity is scheduled to be 90,000 vehicles, and will eventually be expanded to 200,000 vehicles.
North America   PSA left the North American market in 1991, but determined that in order to become a global automaker, it must re-enter it. The OEM has formulated a ten-year plan:
* First, begin a car sharing business in 2017.
* Export PSA vehicles and construct a mobility service that uses those vehicles.
* The final goal is to sell PSA vehicles in North America.
Source: PSA's FY 2016 RESULTS


Sales Forecast by LMC Automotive:PSA Group's sales in 69 countries will be 3.84 million units in 2020

LMC Automotive Quarter 1 2017)

PSA Group's Sales Forecast

  According to LMC Automotive's sales forecast (Quarter 1 2017), PSA Group's light vehicle sales in 69 countries will be 3.84 million units in 2020 (excluding Opel).

  Sales in China in 2016 decreased to 616 thousand units down by 15.8% from 2015, however, it will increase steadily from 2017. China will be the Group's largest market, reaching 789 thousand units in 2020.

  Sales in France will increase in 2018 and 2019 due to key model renewals. Sales in France in 2020 will be 744 thousand units, which will be the group's second largest market following China. Sales in Iran will expand rapidly, as described below, and its sales in 2020 will be 564 thousand units, maintaining the Group's third largest market.

  Sales in three European countries, Spain, Italy and UK, will be nearly flat around 200 thousand units through 2020, respectively.

  LMC Automotive comments; "PSA's global output was relatively weak in 2016, growing by less than 1%. This could have been worse, however, had it not been for the robust growth of PSA's revived Iranian output as the country received a boost following the lifting of sanctions. Even so, this fillip for the group was not enough to offset a poor performance in China, where buyers were lured away from PSA by the improving competitiveness of local brands. Europe remained steady."

  "Despite a poor start to 2017 (Q1 is estimated at -3.6%) key model renewals are expected to progressively help lift global output by almost 4% this year. Moving on from a 15% contraction in output during 2016, PSA's Chinese volume should post a 4.5% rise in 2017, with Iran continuing to forge ahead. In the medium term, targeted model renewals and strong strategic growth targets in China, Iran and Morocco will help PSA Group's global output increase by 4.5% (CAGR) through to 2021."



PSA-Opel deal analysis

  The research company also comments; "At the time of writing, General Motors has agreed to sell its European operation (Opel/Vauxhall) to PSA for EUR 2.2 billion, including six assembly and five component manufacturing facilities, as well as an engineering center. The purchase will add around 1million units to PSA's global total, pushing it towards 4.5 million in 2017. Although PSA will still be able to use the current Opel technology under license throughout the transition period, there can be little doubt that in the medium term, future Opel/Vauxhall models will migrate to PSA platform engineering. This purchase will have consequences for the manufacturing footprint of the new enlarged PSA Group. Some of the plants are currently operating well below profitable utilization levels and, thus, significant rationalization is likely, unless a step-change in market penetration can be achieved." "While PSA-Opel deal will not be completed until later this year, in future reports LMC Automotive will show Opel under the PSA Group."

PSA Group's light vehicle sales forecast by make (Top 10 countries)

(Please click here to download sales forecast for major 69 countries)

2014 2015 2016 2017 2018 2019 2020
PSA by
brand
Peugeot 1,919,133 2,009,749 2,066,713 2,147,022 2,126,521 2,202,346 2,325,266
Citroen 1,159,033 1,128,340 1,074,812 1,122,172 1,205,990 1,258,961 1,309,022
DS 115,587 104,072 86,148 86,185 108,228 179,819 196,345
Mitsubishi 21,097 17,822 13,837 3,556 3,915 4,425 4,723
Fiat 304 229 303 345 332 313 356
PSA Group total @ 3,215,154 3,260,212 3,241,813 3,359,280 3,444,986 3,645,864 3,835,712
China Peugeot 384,583 406,943 349,439 340,594 351,634 366,351 395,373
Citroen 320,321 298,632 249,638 265,797 302,389 334,005 362,638
DS 23,989 24,849 16,180 22,705 27,079 28,827 27,881
Mitsubishi 3,157 1,570 1,200 2,360 2,817 3,261 3,507
China sub-total 732,050 731,994 616,457 631,456 683,919 732,444 789,399
France Peugeot 362,632 385,534 400,142 407,284 394,634 400,972 402,223
Citroen 257,299 254,524 252,051 265,411 273,948 269,982 274,866
DS 32,317 30,739 28,566 24,673 29,906 58,375 66,433
Mitsubishi 6,363 6,689 6,113 359 0 0 0
France sub-total 658,611 677,486 686,872 697,727 698,488 729,329 743,522
Iran Peugeot 315,003 342,796 422,230 491,475 474,185 501,188 563,610
DS 0 0 70 92 104 115 125
Iran sub-total 315,003 342,796 422,300 491,567 474,289 501,303 563,735
Spain Peugeot 79,728 97,784 108,510 116,417 120,921 124,299 123,863
Citroen 66,401 76,500 82,534 87,917 94,888 94,960 96,047
DS 4,808 5,031 4,547 4,280 7,132 15,067 17,412
Mitsubishi 2,103 2,916 2,249 0 0 0 0
Spain sub-total 153,040 182,231 197,840 208,614 222,941 234,326 237,322
Italy Peugeot 80,778 94,279 103,370 112,166 112,038 113,286 110,920
Citroen 54,804 61,874 69,070 81,387 90,351 92,672 91,246
DS 4,503 4,627 3,699 4,048 7,396 14,454 16,577
Mitsubishi 1,247 1,002 900 0 0 0 0
Italy sub-total 141,332 161,782 177,039 197,601 209,785 220,412 218,743
UK Peugeot 135,834 138,617 132,415 118,758 104,093 101,270 102,142
Citroen 86,776 99,221 90,725 81,895 78,105 79,618 82,922
DS 23,801 19,498 15,927 13,588 11,755 18,043 18,444
UK sub-total 246,411 257,336 239,067 214,241 193,953 198,931 203,508
Germany Citroen 53,292 55,262 58,803 53,538 57,501 59,533 59,042
Peugeot 61,628 62,954 65,753 61,914 58,640 57,176 55,072
DS 7,645 5,446 4,380 4,118 5,068 9,229 10,216
Mitsubishi 1,414 1,043 365 0 0 0 0
Germany sub-total 123,979 124,705 129,301 119,570 121,209 125,938 124,330
Argentina Peugeot 68,797 50,338 61,821 67,184 71,150 75,354 80,169
Citroen 32,338 21,046 24,194 27,666 28,435 29,931 31,580
DS 478 321 611 849 939 1,145 1,140
Mitsubishi 296 36 1 0 0 0 0
Argentina sub-total 101,909 71,741 86,627 95,699 100,524 106,430 112,889
Belgium Peugeot 44,898 44,678 46,102 46,007 45,835 45,735 44,581
Citroen 35,624 33,009 32,703 32,619 34,857 36,583 36,932
DS 3,348 3,124 2,675 2,452 3,522 6,532 7,689
Mitsubishi 1,136 919 526 0 0 0 0
Belgium sub-total 85,006 81,730 82,006 81,078 84,214 88,850 89,202
Brazil Citroen 53,477 30,856 24,395 23,741 27,211 30,004 36,783
Peugeot 40,527 26,678 25,736 25,368 28,126 31,486 35,778
DS 883 427 136 172 223 266 298
Brazil sub-total 94,887 57,961 50,267 49,281 55,560 61,756 72,859
Top 10 countries total 2,652,228 2,689,762 2,687,776 2,786,834 2,844,882 2,999,719 3,155,509
Source: LMC Automotive "Global Automotive Sales Forecast (Quarter 1 2017)"
(Note) 1. Data indicates figures of only small-size vehicle, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 ton.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3. For more information or inquiries of forecast data, please contact LMC Automotive.


Key word
PSA, Dongfeng Motor, Opel, Push to Pass, Back in the race

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