Peugeot CEO outlines plan to boost profit

Rather than adding a near-premium subbrand or a dedicated upscale model line, Peugeot will squeeze more profits out of its lineup by adding higher-end versions to each model line. Peugeot CEO Maxime Picat also has great expectations for the new 308 compact hatchback, which he says has a better residual value than the segment's leader, the Volkswagen Golf. Picat spoke with Automotive News Europe Editor Luca Ciferri.

The new Peugeot 308 has moved upscale but its entry price is the same as the 307 it replaced. Will increased profit margins come from higher average transaction prices or from lower production costs?

There are multiple ways. With higher content and higher quality we can ask for better prices or lower incentives. Half of Europe's compact car sales are to fleets and a high quality level helps a lot on residual values here. Indications show that the 308 is even better than the VW Golf on residuals. This clearly helps us in fleet pricing. We have also found innovative solutions to trim our production costs, which help us both in fleets and with private customers.

At PSA, will the pricing work like this: the Citroen C-line as the entry level, Peugeot models in the middle and Citroen DS variants at the top?

It is more complicated than that because we are a multi-dimension business. Premium brands have gone down into lower segments. Low-cost brands have expanded their ranges and increased their sales. European 'generalist' automakers like us are the squeezed middle. We also have a European manufacturing footprint that we have to protect and the only solution is to move upmarket. In the past we had two brands competing for the same customers. Our plan is to move upmarket but in different ways: Citroen with a specific line, the DS, while Peugeot will move upmarket by improving the mix of each model.

Can you provide examples?

For the Peugeot 208, about 40 percent of sales are for trim levels three and four, which are the two highest; 70 percent of 2008 sales are level three or above. We have special versions such as the 208 GTI. Above the 208 GTI, we will soon have an even sportier 208 R, which is a good example of what we would like to add to top the 308 range. Moving upmarket with special versions of each model line is not very different from what Volkswagen does with its GTI/GTD variants.

Will a Citroen C3 subcompact start below a Peugeot 208?

The prices will be different because we will address different customers and different competitors. The market decides the price. A Citroen should not be cheaper by definition; it will tell a different story than a Peugeot model.

What role does the low-cost 301 compact sedan play at Peugeot?

It is sold in North Africa, Turkey, eastern Europe and Russia. We have also launched it in Mexico and Chile and Argentina will follow. We plan to export about 90,000 units a year from Vigo, Spain. We will produce and sell it in China, and that's another 60,000 to 70,000 cars a year. The 301 could account for 150,000 units a year worldwide.

What will come next in the 01 range?

The 301 fills the gap for an affordable compact sedan. We have no plans to make a 201 or 401 because we think there is no market. Only Chinese carmakers could build an affordable big car such as a 401, so it's not for us.

Do you need a 201 in South America where the old 206 is still built?

No, because the 301 is a modern car with a modern engine, a roomy cabin, a huge trunk, and a contemporary design that is not far from a 508. A 301 is a real Peugeot. The 206 was about extending an existing model's life to answer needs in countries where cars survive maybe sometimes too long.

The Peugeot 4008 and Citroen C4 Aircross SUVS are close to the vehicle on which they are based, the Mitsubishi ASX. Will this change?

What worked in the past doesn't work anymore when it comes to customer needs. We definitely want every future cooperation to deliver a strong differentiation between the brands. There is such a broad demand out there that we cannot just have the same car with three different logos.

Will there be greater differentiation between the next-generation Peugeot 107, Citroen C1 and Toyota Aygo sister models?

That's exactly what I had in mind when I talked about the stronger differentiation in the future.