Each PSA subsidiary should cap its general and administration expenses at 1 percent of revenue. Tavares also wants PSA to reduce its vehicle-production cost by 700 euros per vehicle between 2015 and 2018, compared with a previous target of 500 euros over the same period. Last year, the saving was about 211 euros per vehicle, the company said.
By spending wisely Tavares expects to have the cash it needs to invest in new technologies. That includes the seven plug-in hybrids and four battery-powered vehicles he wants the company to launch between 2019 and 2021 as part of a 34-vehicle product offensive. Tavares also wants to equip Peugeot, Citroen and DS models with semi-autonomous driving features such as traffic jam assist by 2018 and start rolling out fully autonomous vehicles by 2021.
On the second objective, Tavares plans to be cautious because he is unsure whether a volume player will be capable of making a profit from autonomous cars by the early 2020s "because of the huge amount of technology you need to make these products drive safely."
Extended value chain
While Tavares will hold back a bit longer on making a big commitment toward autonomous cars, he will be much more aggressive in transforming PSA from an automaker into a mobility provider, a move he expects will generate more than 100 million euros toward the company's operating profit by 2021. The cash will come via a number of initiatives that include a multi-brand leasing company for business-to-business customers in Europe; increased sales of service contracts in Europe (the goal is a penetration rate of 60 percent five years from now from 33 percent in 2015); and offering insurance based on "pay as you drive" or "pay how you drive" billing.
Another way PSA plans to expand its value chain is by increasing aftermarket revenues by 10 percent within two years and another 25 percent by 2021.
To do so, PSA will try to maintain a lengthier service relationship with customers who, as their vehicles age, tend to switch to independent repair shops because they historically have offered lower prices for the work. To change this, PSA will expand its Euro Repair Car Service network to 10,000 locations from 2,000 last year.
This network offers competitive prices on components that come from the same partsmakers that supply the French automaker's production vehicles. PSA also will try to lure more customers in Europe to use its mister-auto.com internet portal, which offers low prices on a number of parts that customers can install themselves.
PSA also expects that by 2021 it will generate 300 million euros in annual revenues from its car-sharing, fleet-management and connected-car services. At the same time, the company is setting up a 100 million euro venture capital fund to promote innovative mobility solutions and applications.
While Exane's O’Brien is positive about PSA's move into new business areas, he said that none of the steps the French automaker plans is unique. "All OEMs – not to mention many non-auto players – will chase mobility services and we are not sure what gives PSA a competitive advantage," he said.