Growth strategies to focus on aggressive pursuit of modular platform development, vehicle electrification, geographic expansion and new mobility solutions
In late October this year, news broke of the intended merger of two automotive heavyweights, Groupe PSA and Fiat Chrysler Automobiles, (FCA) to create the world’s fourth largest automaker. While the proposed merger is a strategic response to the slowdown in global demand and unprecedented technological disruption, it also serves to highlight how far PSA has come from being on the brink of collapse five years ago.
Central to PSA’s astonishing resurgence has been its Push to Pass’ growth plans for 2016-2021, now entering Phase II, which pivot around consistent performance, forward-looking core model plans—the launch of one new car per year per brand (Peugeot, Citroen and DS Automobiles) per region—and, strong geographic expansion.
According to new analysis by Frost & Sullivan, Groupe PSA’s Automotive Growth Strategies, 2019–2025, the company’s competitive success will be driven by the development of two modular platforms, the move towards 100% electrified light commercial vehicles (LCVs), the strengthening of new mobility solutions, and penetration into at least two new overseas markets.
Focused Growth Strategies
In 2018, Groupe PSA ranked No.1 in the European light commercial vehicle (LCV) segment, and No. 2 behind VW in the European passenger vehicle (PV) segment. Revenues increased by 18.9% over 2017, sales rose to 3.88 million vehicles marking a 6.8% increase, and recurring operating income surged to €5.7 billion representing a 43% hike.
As the company works toward reinforcing its competitive position amidst dramatic technological transformation, it will turn to the following strategies:
- Group Vision 2021
PSA plans to align its PVs and LCVs around 49 key model lines. Simultaneously, it aims to boost its expertise in electrification and increase revenues from digital technology.
Starting from 2019, every new model launch will be accompanied by a hybrid or electric equivalent. By 2021, 15 new electric models are expected to be incorporated into the portfolio with the goal of electrifying 50% of the vehicle range. PSA’s Core Model strategy is to optimally position its Peugeot Citroen DS Automobile brands in various regional markets.
- Market Expansion
The roots of PSA’s global expansion plans are located in the prospect of scalable investments, localization of parts, and manufacturing in order to deliver cars that meet regional requirements. Through strategic alliances with regional participants, PSA is poised to increase its global presence by 50%. Among the main target markets will be North America, India and Russia.
PSA is re-entering the U.S. after an almost thirty year gap, using mobility services as a strategic launch pad. In 2018, PSA’s Free2Move mobility services generated nearly €4 billion in North America. Meanwhile, the Peugeot brand will spearhead the PSA Groupe’s entry into North America by 2020, with core mobility services on track to be expanded by 2025.
The company’s India strategy is focused on making the country a base for local component manufacturing and as an export hub for the India-Pacific region. There are also plans for model launches: the Citroen in India in 2020 and the Opel in Russia in 2025.
- Multi-energy Platforms
PSA is committed to overhauling its vehicle manufacturing platforms, consolidating them from six to only two: the Common Modular Platform (CMP) and Efficient Modular Platform (EMP) 2. With this, it aims to save 20 to 50% on development costs. The CMP is capable of producing internal combustion engine (ICE) vehicles and electric vehicles (EVs) on a single production line.
By 2021, PSA is projected to launch 10 CMP-based new models along with 7 eCMP-based battery electric vehicles (BEV)s to support further economies of scale for its small and compact car segment.
Starting from 2019, EMP2 will become the base architecture for Opel and Vauxhall (OV) vehicles. With the aim of optimizing group production, 100% OV cars will be built on the EMP2 platform from 2024 onwards.
- Multi-brand Aftermarket
Groupe PSA’s aftersales strategy is to build an omnichannel ecosystem of parts, service and maintenance, and technology to support its thrust on geographic expansion. By 2021, the company aims to fully integrate OV into DISTRIGO, its multi-brand parts distribution brand, and expand its aftermarket revenue by 25%.
- New Mobility Services
In a sign of the potential it sees in new mobility solutions, the company is expected to invest €100 million through 2021 in tech start-ups involved in car sharing, fleet management, smart services, connected after-sales, and vehicle data management.
PSA’s strategic re-entry into North America will be predicated on its mobility services. In 2018, PSA launched its mobility services label Free2Move in Europe and the U.S. In a signal of its future success, Free2Move is anticipated to build up a user base of nearly 5 million within the next 5-6 years.
Streaming Ahead
Groupe PSA is on track to leverage the transformative potential of connected, autonomous, shared and electric (C.A.S.E) technologies. By 2025, it aims to electrify 100% of its product line up, increase the number of connected vehicles in its portfolio from 50% to 100%, and offer self-driving cars. At the same time, it plans to establish a presence across all aspects of mobility solutions. This approach, together with targeted regional expansion, will underline its strategic repositioning as a more well-rounded, Mobility-as-a-Service (MaaS) provider. By 2021, Groupe PSA expects its mobility services to generate more than €100 million.
As it looks to chart a new course in collaboration with FCA, the company will need to focus on global penetration, electrification, expansion into connected services, and investment in new mobility services.
By looking beyond Europe to emerging markets and by leveraging production facilities in India and Malaysia, PSA can widen its presence in ASEAN and South Asia. Using its new platform eCMP developed specifically for electric powertrains, PSA can launch more C-SUVs into high growth markets in Europe and China. With its technology partners, nuTonomy and AImotive, it can accelerate autonomous vehicle development. And, with Free2Move, it can more fully explore the MaaS industry to generate additional revenues.
For more information on Groupe PSA’s Automotive Growth Strategies, 2019–2025, please write to Shruti Pathak, Research Analyst – Mobility, at shruti.pathak@frost.com
