NICK GIBBS

Why Vauxhall is likely to survive despite a steep sales slump

Vauxhall has started selling the Crossland X, pictured, the first of two new SUVs based on PSA technology.
Nick Gibbs is a UK correspondent for Automotive News Europe.
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PSA Group's strategy to reduce non-profitable new-car sales is having a significant effect on the automaker's Vauxhall brand in the UK.

Vauxhall's sales slide was illustrated most starkly in October, when the brand finished sixth after its registrations fell 35 percent in a market down 12 percent. In the first 10 months, Vauxhall sales are down 21 percent.

For many years, Vauxhall has been the UK's second biggest-selling brand after Ford.

Vauxhall's slump was so bad that it failed to get a model among the top 10 best-sellers for the first time in a very long time.

Asked how long, a Vauxhall spokesman said: "We're talking decades."

Vauxhall's top-seller in the UK was the Mokka subcompact SUV at No. 17, according to data from the SMMT industry body. Vauxhall's traditional best-sellers, the Astra compact car and Corsa subcompact are tanking. Astra sales fell 63 percent in October and the Corsa registrations plunged 56 percent.

Vauxhall says it is moving out of 'toxic' unprofitable sales channels such as daily rentals to focus more on profitable areas such as retail sales.

The problem is that Vauxhall has relied for so long on fleet sales that the strategy is exposing a core weakness: lack of natural demand.

"No-one has bought a Vauxhall in years…you don't buy a Vauxhall, you get given it," Max Warburton, an analyst at Bernstein quoted an unnamed UK industry executive as saying in a Bernstein investors' report.

Warburton believes Opel should dump the Vauxhall brand and replace it with Opel. "Even the most jingoistic Brexiteers would rather buy a German car," he said in an investors' note, referring to Britain's imminent exit from the European Union (another headache for Vauxhall).

Future secure

But PSA CEO Carlos Tavares says Vauxhall is not in danger and even hinted that its future could include ending the re-badging of Opel cars. "Nothing is taboo, including differentiation," Tavares said in an interview with Bloomberg. Tavares said there is value in developing the marque around its long heritage to reconnect with British consumers.

Opel CEO Michael Lohscheller committed to Vauxhall when he presented the PACE turnaround plan for Opel/Vauxhall on Thursday. "A Vauxhall will always be a true Vauxhall and it will remain a true British brand," he said.

Backing for Vauxhall also came from the Opel labor side, who might be expected to support German factories over Vauxhall's UK plants such as Ellesmere Port where PSA is cutting 400 jobs,

The brand could turn out to be a valuable asset in the wake of Brexit, said Wolfgang Schaefer-Klug, Opel's top labor representative. "It wouldn't be smart if management just says we close Ellesmere Port and suddenly there are trade barriers and we have no production capacity in this important market and lose access," he told reporters on Thursday in Ruesselsheim, according to Bloomberg.

SUV boost

A bigger lineup of SUV/crossovers will give Vauxhall a deeper foothold in a booming part of the market. Vauxhall sells a version of the Opel Crossland X subcompact crossover and will soon get the Grandland X compact model. Both are based on PSA platforms and join the Mokka X in Opel/Vauxhall's lineup.

Vauxhall may have dropped to third place among the UK's best-selling brands in the first 10 months behind Ford and Volkswagen but it still sold more than Peugeot and Citroen combined.

One of the key messages from Lohscheller's PACE turnaround plan was that Opel and Vauxhall will strive to extract more money per car sold to reverse years of losses.

Opel seems to acknowledge that sales numbers might fall as a consequence of focusing on profitable sales. The PACE strategy targets a breakeven point of 800,000 annual Opel/Vauxhall sales. Last year's volume was 1.16 million.

You can reach Nick Gibbs at ngibbs@crain.com.

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