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WIKI ANALYSIS
PSA Peugeot Citroen (EPA:UG) is Europe’s second largest automaker with 13.8% of the European market and the sixth largest worldwide with 4.8% worldwide market share in 2007.[1] The company makes both passenger cars and commercial vehicles, making 2/3 of its sales in Western Europe.[2] Unlike PSA’s German and Italian competitors, which often sell automobiles under numerous brand names, PSA has just two - Peugeot and Citron.
In 2007, PSA increased unit sales 3.8% overall, and 11.1% in international markets. Operating income increased 32.4% in the first half of 2008 to €733 million euros, from €303 in the first half of 2006,[3][4][5] as the company cut €882 million in operating costs and completed development of 9 new cars for launch in the second half of 2008. The company's turnaround has been dramatic since growth lagged in late 2006 and the company restructured to refresh PSA's aging fleet, which at the time had an average design age of 4.2 years, well above the industry's average.[6][7]
Business Overview
Peugeot Citron brought in revenue of €60.6 in 2007 while employing 207,800 workers in 150 countries.[8] After several years of falling sales, PSA returned to sales growth by tapping strong demand from emerging markets. PSA has number one market share in the automobile industry in France, Spain, Belgium, and Portugal; and the number two position in Denmark, Switzerland, and Italy.[9]
During 2007, PSA launched a series of popular new or redesigned vehicles. These include the Peugeot 207, PSA's top selling car in '07 with a sales volume of 520,200 cars, and the Peugeot 308, the group's third highest seller.[11] The Citroen brand had success in penetrating the multi purpose vehicle (MPV) market with the C4 Picasso, capturing nearly 20% of this market.[12] PSA's success with MPVs is significant because most major automakers, such as Ford and Volkswagen are investing heavily into the MPV segment in the belief of strong future demand.
Other Activities
PSA owns a number of subsidiaries engaged in business related to the automotive industry.
Banque PSA Finance finances the sale of PSA vehicles. For 2007, this financing arm had a portfolio of €23,456 billion and an operating income of €608 million. [13]
Faurecia produces automotive components such as seats, cockpits, acoustic packages, doors, front-ends, and exhaust systems. Worldwide Faurecia has 60,000 employees and 190 manufacturing facilities, creating revenues of the €12,661 during 2007.[14]
Gefco organizes vehicle logistics, transportation and Supply-chain management for automakers worldwide. This division had sales of €3,554 million in 2007.[15]
Peugeot Motorcycles is the third largest producer of small motor cycles and scooters in Europe.[16]
Trends and Forces
Growing Importance of Fuel Efficiency
PSA held 26% of the European market for vehicles emitting less than 130 grams of CO2 per kilometer in 2007, as 52.1% of PSA’s production volume was diesel powered as the company has embraced fuel efficient diesel engines.[18] [19] High fuel prices and government regulation of automobile fuel efficiency make the successful development of fuel efficient cars important to any automaker’s future, and PSA has long produced exclusively small, fuel-efficient automobiles as opposed to SUVs or performance vehicles. Of the European automakers, which have comparatively better efficiency in comparison to Japanese or U.S. producers, PSA's line-up of vehicles has the lowest overall CO2 emissions.[20]
PSA in Emerging Markets
PSA has several factories in Eastern Europe, and has plans to open its first Russian factory in Kaluga during 2010. The company also plans to build two new factories in China, both of which will be operated as a joint venture with a domestic Chinese automaker. Growing consumption from the BRIC economies provides an opportunity for automakers over the next several decades, and PSA has production facilities in Brazil, China, and Russia (but not India).[21] The company’s strongest emerging markets are Brazil and Argentina, where sales increased 29.8% for 2007.[22] Competition already exists for PSA in these markets - firms like Volkswagen (VLKAY), Ford Motor Company (F), and General Motors (GM) already have multiple manufacturing facilities in China, and control a large percentage of the market share.
High Labor Costs in European Union
Approximately 90% of PSA’s employees work in Western Europe, a region with one of the highest labor costs in the world - labor in Western Europe costs on average 20% more than in the U.S., twice as much as in Korea, and six times more than in Brazil.[23] In part because of the unique relationship between the French state and major national firms such as PSA (the French Government has been shareholder in two-thirds of France's 20 biggest companies in the past several decades[24]) and also due to PSA’s limited operations outside Western Europe, the company has little latitude to transfer production to areas with lower labor costs.
Market Share
| Manufacturer | May-06[25] | May-07[26] | May-08[26] |
| GM | 25% | 24% | 19% |
| Toyota | 15% | 17% | 18% |
| Ford | 17% | 17% | 15% |
| Chrysler | 13% | 13% | 11% |
| Honda | 9% | 9% | 12% |
| Nissan | 6% | 6% | 7% |
| Hyundai | - | 5% | 6% |
| BMW | - | 2% | 2% |
| Volkswagen | - | 2% | 2% |
| Daimler | - | 1% | 2% |
| Manufacturer | Rank | 2007 | 2008 | Change in Production | Manufacturer | Rank | 2007 | 2008 | Change in Production |
| GM | 1 | 13.0% | 11.9% | -11% | Suzuki | 11 | 3.6% | 3.8% | 1% |
| Toyota | 2 | 11.8% | 13.3% | 8% | Chrysler | 12 | 3.5% | 2.7% | -25% |
| Volkswagen | 3 | 8.7% | 9.3% | 3% | Daimler | 13 | 2.9% | 3.1% | 4% |
| Ford | 4 | 8.7% | 7.8% | -13% | BMW | 14 | 2.1% | 2.1% | -7% |
| Honda | 5 | 5.4% | 5.6% | 0% | Mitsubishi | 15 | 2.0% | 1.9% | -7% |
| PSA | 6 | 4.8% | 4.8% | -4% | Kia | 16 | 1.9% | 2.0% | 2% |
| Nissan | 7 | 4.8% | 4.9% | -1% | Mazda | 17 | 1.8% | 1.9% | 5% |
| Fiat | 8 | 3.7% | 3.6% | -6% | Avtovaz | 18 | 1.0% | 1.2% | 9% |
| Renault | 9 | 3.7% | 3.5% | -9% | Faw | 19 | 1.0% | 0.9% | -6% |
| Hyundai | 10 | 3.6% | 4.0% | 6% | Tata | 20 | 0.8% | 1.1% | 36% |
Competition
PSA Peugeot Citroen is unique from any other major automaker in that it only markets its products under two brands: Citroen and Peugeot. Citroen is a slightly more upscale brand while Peugeot focuses exclusively on the mass markets. This focus has been advantageous, as competitors from GM to BMW have been distracted by trying to manage too many brands. In spite of its limited brands, PSA produces vehicles that compete for every niche of the mass auto market, excluding performance and luxury vehicles.
The automakers Renault, now merged with Nissan Motor (NSANY), and FIAT S.p.A. (F-MI) are PSA's chief competitors due to their focus on smaller vehicles and the Western European market.
References
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ PSA 2006 Interim Report
- ↑ PSA 2008 Interim Report
- ↑ PSA Peugeot Citroen Interim Report
- ↑ PSA Peugeot Citroen Interim Report
- ↑ The Economist: Christian Streiff, Europe's newest car boss
- ↑ The Group in 2008
- ↑ PSA Peugeot Citroen 2007 Annual Report, page 58
- ↑ PSA Peugeot Citroen 2007 Annual Report, page 10
- ↑ PSA Peugeot Citroen 2007 Annual Report, page 58
- ↑ PSA Peugeot Citroen 2007 Annual Report, page 62
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ Results and Key Figures
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ The Economist: The European car industry
- ↑ The Group in 2008
- ↑ The Group in 2008
- ↑ Bureau of Labor Statistics
- ↑ The Economist: The state as owner
- ↑ [http://oica.net/wp-content/uploads/world-ranking-2007.pdf OICA - World Motor Vehicle Production, 2007]
- ↑ [http://oica.net/wp-content/uploads/world-ranking-2008.pdf OICA - World Motor Vehicle Production, 2008]
- ↑ Suite 101: Top Selling Cars in Europe in 2007
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