C4 Cactus showcases Citroen's new positioning

The C4 Cactus will offer Citroen's Airbumps in a choice of 4 colors. The Airbumps on the sides and the bumpers are supposed provide protection to the exterior to help lower repair costs.
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PARIS (Bloomberg) -- PSA/Peugeot-Citroen has introduced a new compact model as part of a move by the Citroen brand to serve customers seeking cheaper vehicles than its current lineup.

The Citroen C4 Cactus, set to go on sale in June, was unveiled at a presentation Wednesday night in the Paris suburb of Le Bourget. The model will be built at the company's plant in Madrid, Spain, and will be the showcase model that Citroen presents at the Geneva auto show next month.

The car is based on the same chassis as sister brand Peugeot's 208 hatchback and 2008 crossover.

Departing PSA CEO Philippe Varin outlined a strategy last year for a deeper differentiation between the Peugeot and Citroen brands as part of the manufacturer's efforts to return to profit.

The company is struggling to stem losses after a six-year slide in Europe's automotive market to a two-decade low.

Citroen will be split into value models such as the C4 Cactus that will comprise its so-called C-Line and near-premium offerings from its DS subbrand. The Peugeot brand will try to squeeze more profits out of its lineup by adding higher-end versions to each model line.

"It's an interesting idea, which reminds me what the Koreans used to offer before they decided to go more along the route" of Volkswagen Group with upgraded models, Erich Hauser, a London-based analyst at International Strategy & Investment Group, said by phone. Citroen is being repositioned "like a half-budget brand."

Model pricing

The company hasn't disclosed the price of the C4 Cactus. The cheapest Citroen model in Germany is the C1 minicar, which sells for 9,550 euros ($12,900), including value-added tax. Peugeot's lowest-price vehicle is the 107 minicar at 9,750 euros, while the 2008 starts at 14,700 euros.

Citroen will not release prices for the C4 Cactus until next month's Geneva auto show, but a German media report said the model likely will start just below 16,000 euros in Germany.

PSA reported a 510 million-euro first-half operating loss at the group's automotive unit. The company's reorganization includes shutting a car plant near Paris, reducing its French work force by 17 percent by the end of 2014 and expanding sales outside Europe as its home market offers few prospects for economic growth.

The company is also looking at selling as much as 3 billion euros of shares, with Chinese partner Dongfeng Motor Corp. and the French state potentially buying stakes, PSA said on Jan. 20.

The C4 Cactus will be equipped with wide, sofa-like front seats, front passenger air bags in the roof and controls on a touchscreen, the company said. The cost of operating the vehicle will be 20 percent less than for competing models in the segment, Citroen said.

'Optimized budget'

"That car is a clear manifesto of the future positioning of our Citroen range, with the same characteristics, more design, more useful technology and an optimized budget," Citroen Managing Director Frederic Banzet said in an interview with Bloomberg Television. "You can say it's a smart buy."

PSA's 2013 European sales fell 9 percent in 2013 to 1.34 million vehicles, narrowing the group market share to 10.9 percent from 11.7 percent in 2012, according to industry association ACEA. That compares with growth at VW Group, Europe's biggest carmaker, which increased 2013 market share to 25.1 percent from 24.8 percent in 2012.

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