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
|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.
PSA: improved performance through European sales and cost cuts (January 2016)
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)
|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.
|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.
|The Peugeot 3008 SUV, awarded the "European Car of the Year 2017" (Geneva Motor Show 2017)|
|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 (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.|
PSA's consolidated results
(in million EUR)
|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%|
|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
|2011||2012||2013||2014||2015||2016||Mid term target||Number of new models|
|China & South-east Asia||703||779||564||742||736||618||2018||1,000||20|
|Middle East & Africa||227||169||180||384||2021||700||23|
|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）
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)
|PSA Group total||@||3,215,154||3,260,212||3,241,813||3,359,280||3,444,986||3,645,864||3,835,712|
|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.
PSA, Dongfeng Motor, Opel, Push to Pass, Back in the race
<Automotive Portal MarkLines>