In terms of brand positioning, Tavares says the 308 compact, the 2014 European Car of the Year, epitomizes what he sees as Peugeot’s strengths: a convergence of the rigor, seriousness and robustness typical of a German car with the emotion of a Latin brand. He also considers the C4 Cactus a benchmark for future Citroens because of its comfortable design, ease of use and intelligent innovations.
Better pricing in Europe
Analysts say that to get PSA to break even by 2016 or sooner Tavares must reduce PSA’s cash burn by increasing the efficiency of its European production network and closing the pricing gap with competitors. “If Tavares can close the price gap with Volkswagen by 10 percent … that alone could fix the bottom line,” said Paris-based Deutsche Bank analyst Gaetan Toulemonde.
Commerzbank’s Gommel said Tavares proved at Renault that he knows how to turn around a brand’s pricing. “He can improve pricing more easily than when he was at Renault because PSA has a stronger brand reputation than Renault has.”
PSA shut its plant in Aulnay, France, last year and is looking at ways to lower production costs further in its home region. One way is to add models to the underutilized plants, but Tavares also wants to maximize the efficiency of PSA’s European factories, French newspaper Le Figaro reported. Tavares said in February that margins for the Citroen C-Elysee and the Peugeot 301, which are made in Vigo, Spain, are marginal and did not reflect an efficient use of capacity. “Tavares must improve PSA’s European footprint. Capacity is clearly an issue and existing capacity needs to be better utilized,” Gommel said.
Streamline Russia, Brazil
Tavares is expected to announce that PSA will streamline its offerings in South America and Russia. It is losing money in both regions, analysts say. PSA has a production capacity of 100,000 units in Kaluga, Russia, but the plant only produced 20,000 vehicles in 2013, French newspaper Le Monde reported. The automaker also offers more than 25 different vehicles in Russia, which Deutsche Bank’s Toulemonde says is too many, especially in a market that has been in decline since last year. “Tavares needs to sell fewer than 10 models there,” he said.
Added Commerzbank’s Gommel: “In South America and in other emerging markets where it already has local production, PSA must do better. It needs to improve its localization at its plants in emerging markets, where it continues to import too many parts.” Doing this would better protect PSA from exchange rate fluctuations, the analysts said.
Meanwhile, CM-CIC’s Couvreur pointed out that Tavares was instrumental in making Renault successful in eastern Europe and South America by offering limited ranges that sold in high volumes. “I think that PSA can be profitable in Brazil and in Russia in two to three years by adopting a more localized strategy. These two countries currently are Tavares’ problem markets,” she said.
Tavares enters PSA as the automaker is starting to gain traction in China. His job will be to strengthen the automaker’s ties with Dongfeng while avoiding potential conflicts over technology sharing. “Tavares must clearly make the boundary between PSA’s and Dongfeng’s technologies,” CM-CIC’s Couvreur said. She thinks that PSA needs to protect its expertise but fears that this will be difficult. “Dongfeng’s two representatives on PSA’s supervisory board will try to accelerate this technology transfer,” she said. Couvreur also fears that one day Dongfeng will leave the alliance with enough knowledge and technology to compete against its former partner. She says this has happened in China to companies such as Alstom and Airbus. “This is going to be a very touchy subject for Tavares,” she said.