Afterthoughts: The French Question

The reaction Peugeot’s return to the U.S. Market a couple weeks back falls into three categories.

1. OMG! We're getting exciting French cars again
2. Why is another automaker coming to the U.S.?
3. Split between 1 and 2

I should say that I fall into camp three at the moment. Previously, I was in number one when the rumors began to swirl around about PSA Group - parent company of Peugeot, Citroen, DS, Opel, and Vauxhall - making a possible return in late 2014. The dreams about possibly seeing a small number of Citroen and DS vehicles running around the U.S. sparked some joy. Peugeot was nowhere to be seen in my fantasy as they were seen to be somewhat bland in terms of their design.

But once I had my dream play through my head, I began to wonder if this could work out for PSA Group. Despite being seen as the holy grail to many outside automakers, the U.S. is very notorious to break in and keep going forward. Consider these quotes from a 2016 report in Automotive News (Subscription Required).

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Invading the U.S. auto market takes equal parts chutzpah and sangfroid. There are 42 brands here hawking 283 nameplates in different models and configurations. Some brands have dropped out, while competitive realities have kept other wannabes from ever making a beachhead.

The list of failed and stalled entrants here includes Italy's Fiat and Alfa Romeo -- both of which are currently attempting second assaults after retreating in 1983 and 1995, respectively. It includes Japanese carmakers Daihatsu and Isuzu, South Korea's Daewoo, and China's Chery Automobile.

"People around the world look at the sales volumes going on here, and they look at the fortunes being made here, and they look at what the outlook is in other parts of the world -- and they want to be here," said Charlie Hughes, owner of the brand-consulting firm Brand Rules. Hughes played a key role in introducing the British premium SUV brand Land Rover to the United States in 1987 and was CEO of Mazda North American Operations. 

So when PSA made their official announcement in 2016, some of my worries began to drift away.

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Step one: Enter the U.S. as a mobility operator from 2017, possibly with Bollore,” said Tavares. Bollore is a French company that builds batteries and compact EVs that are mainly used by a French car-sharing service, Autolib. Citroën and Bollore are currently working together to bring a concept EV into production.
Step two: Start up a car-sharing program (i.e. Zipcar, GM's Maven) that would be owned and operated by PSA.
Step three: If the first two steps are successful, PSA could return “to sell cars in the U.S. supported by regional sourcing when appropriate,” Tavares said.

 

PSA would also conduct extensive research into the U.S. marketplace to determine which brand would take the charge. The end goal was to possibly have a brand in the country by 2026. Possibly is the keyword as they made clear that could pass on this idea if various conditions weren't met.

Since that announcement, PSA has been making some inroads into this plan,

• Establishing a North American office and bringing in Larry Dominique (formerly of Nissan and TrueCar) as the head
• Launching a ride-sharing and car sharing app in various U.S. cities
• Starting to develop vehicles for the U.S.

The most recent announcement of Peugeot as the lead brand surely disappointed some folks as the likes of the C4 Cactus and DS5 would not arriving. But the decision does show the amount of thought and work that has been happening behind the scenes. 

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“Even though Peugeot left in 1991 ... the awareness of the brand and the opinion of the brand are still strong. So, we have a strong starting point with which to start the discussion with consumers,” Dominique said.

“There wasn’t any negative association with the brand. A lot of people said, ‘I don’t know why they left’.”

Still, PSA Group and Peugeot still have a tough hill to climb. Reading through the comments on the article written by Drew, there are two common issues pointed out. One is how Peugeot doesn't have anything unique in their lineup. Two is how Peugeot could be entering a marketplace that is possibly on the verge of a recession.

Let's begin with design. Out of all of the brands under the PSA umbrella, Peugeot plays it very much safe in terms of design. While the brand has been taking some risks in the past few years (especially with their interiors) they are no-where near the likes of Citroen. This difference is very apparent in the history of the two brands, 

• Peugeot producing vehicles that were efficient and simple. But some of those design could jump in terms of elegance.
• Citroen pushing the envelope with their designs that are either praised or hated. DS falls under this umbrella as well.

My hunch is that PSA figured that sending either Citroen or DS would be problematic because they might not appeal to consumers, and just sit on lots.

The second reason does hold slightly more water. Signs are beginning to appear that the U.S. economy could be heading towards a recession - a key item being pointed at is the drop in new car sales. If Peugeot was to enter at the present time, the consequences could be severe and put them in a difficult spot.

But as noted, Peugeot will not be arriving until 2026. That's over six years away and in that time, the economy could be recovering from the recession in question. 

Time is also the biggest enemy to Peugeot. In six years time, the U.S. marketplace could be in a completely different state than where it stands now. Crossovers and SUVs dominate the sales charts at the moment, but it might be electric vehicles that become the dominant choice. There are also various regulations that may come into fruition, along with the possibility of new tariffs on vehicles built in Europe.

There’s also the issue of trying to stand out in the U.S. marketplace. Consider this for a moment; there are over forty automakers selling just under 300 or so nameplates. With the prospect of more automakers from China expected to arrive in the next few years, Peugeot might be entering a crowded field. Some of their current models have the looks, but can it combat strong competition that has a long history and reputation in the country?

One item is very clear, PSA Group isn't stupid. They're taking their time and doing a lot of behind the scenes work before introducing their first models in the U.S. Whether or not this proves to the big success or the white flag being raised remains to be seen.