By on March 18, 2014

Lately there has been a lot of talk, speculation, and actual structural changes within both French car manufacturers, Renault and PSA Peugeot-Citroen, with notably Carlos Tavares switching from one manufacturer to the other over the past year. Being French, this is close to my heart and I thought it would be timely to take stock and evaluate what lies in the future for these two French manufacturers.

Recently, both manufacturers have suffered from the European car market’s weakness, but thanks to the arrival of the Renault Captur and Peugeot 2008, things seem to be turning around. A combination of alliances, low-cost models, and targeted efforts in strategic markets are all strategies being pursued by both OEMs.

PSA Renault Top 15 worldwide marketsPSA and Renault’s Top 15 worldwide markets (click to enlarge) Source: L’Argus

1. European sales

With two established brands, Peugeot and Citroen, PSA is above the Renault Group in Europe. The Peugeot brand alone even passed Renault in January. Over the Full Year 2013, PSA held 11% of the European market thanks to 1.34 million sales, 741,939 for Peugeot and 603,080 for Citroen. Renault for its part held 8.85% of the market thanks to 1.09 million units sold: 803,166 for Renault and 290,078 for Dacia, which is by far the fastest growing major brand on the continent last year at +22%. And here is where the long-term trends show we may be on the verge of a change in leadership somewhere in the next few years…

Renault Captur. Picture courtesy of largus.frThe Renault Captur is about to become one of Europe’s 10 best-selling cars.

PSA went from 15% share in 2003 to 13% in 2007 to 11% this year. Renault went from 10.6% in 2003 to 8.6% in 2007 to 8.85% in 2013, managing to stabilise its share recently thanks to the growing success of Dacia (0% in 2003 to 2.3% in 2013). The launch of the Peugeot 2008, new generation 308 and Renault Captur in 2013, all candidates for a European Top 10 ranking in 2014, will potentially reinforce both brands, but Dacia’s progression seems unstoppable, especially on the back of a very successful launch in the UK last year.

2. Success outside of Europe

France is still both manufacturers’ biggest market. But for the first time in its history, over 50% of Renault’s sales now occur outside of Europe, to be compared with 42% for PSA. China, the biggest car market in the world, will pass France to become PSA’s #1 market in 2014 after its sales in the country gained 26% in 2013 to 546,200 units. Renault will only start manufacturing cars in China – a key to strong sales there – later this year, after its joint-venture with local carmaker Dongfeng got approved last December. We won’t see a significant impact on Renault’s sales in China before 2015-2016, thanks to the timing of the approval. But if PSA has a clear advantage in China, Renault dominates its French rival in all other major developing markets.

Renault Duster. Picture courtesy of zr.ruThe Renault Duster was the third best-selling vehicle in Russia last month.

In Brazil, PSA’s two brands sell 40% less than Renault with one brand and fewer models in its lineup. Renault makes a profit there, Peugeot doesn’t. In Russia, Renault sells 3 times as many vehicles as PSA, comprised almost exclusively(85%) of the Duster, Logan and Sandero sold under the Renault brand, meaning it is very profitable there, while Peugeot loses money. Renault’s takeover of Avtovaz/Lada, finalised this year, which means it will control almost 25% of the Russian market in 2014, with over 650,000 units. Finally in India, Renault has made enormous progress over the past year, solely due to the success of the Duster there, while PSA has cancelled its Indian foray because of a lack of cash.

Carlos GhosnCarlos Ghosn

3. International alliances

Following a failed takover of AMC in the eighties, and Volvo in the nineties, Renault forged a strong alliance with Nissan in 1999, of which it currently owns 43.4%. With Carlos Ghosn at the helm of both brands, the Renault-Nissan alliance has been a rare example of a truly successful international cooperation in the car manufacturing industry. Owning 100 percent of Romanian carmaker Dacia and 80 percent of Korean brand Samsung’s auto venture, Renault is now taking over Avtovaz/Lada, ensuring it a very strong presence in Russia.

Lately, Renault-Nissan started a new cooperation arrangement with Mitsubishi which means a Renault model – the replacement for the Latitude, produced in South Korea – will hit US shores for the first time since 1987, albeit sold as a Mitsubishi. Finally Renault’s Chinese joint-venture with Dongfeng was approved last December. This is where it gets tricky, as Dongfeng currently has manufacturing joint-ventures in China with both PSA (since 1992)Nissan (since 2003) and Renault (since 2013).

Nissan Maxima USA. Picture courtesy of motortrend.comUS Nissan Maxima. Renault compensates its current absence in the USA with the strength of Nissan.

A lot of brands and alliances are involved, but Carlos Ghosn has kept a clear focus on high potential markets. Renault has long been criticised for ‘giving up’ the US and not being present in China. However, once again according to Carlos Ghosn, this is compensated by Nissan’s strength in both markets: Nissan sells almost twice as many cars in the US as it does in Japan and has become the best-selling Japanese carmaker in China only 10 years after launching there.

Peugeot 4008 Mongolia LaunchPeugeot launched in 13 Asian countries over the past 18 months (here Mongolia)

PSA has traditionally preferred one-off technical cooperation without alliances (with Fiat, Renault, Toyota, BMW, Ford…). Philippe Varin, who is about to be replaced at the head of the Group by Carlos Tavares, tried to negotiate ‘true’ alliances which have failed so far: first with Mitsubishi, then more spectacularly with General Motors which took a 7% stake in 2012 and forced Peugeot to stop assembling cars in Iran, costing it precious revenue over the past couple of years. We will have to wait until 2016 to see real economies of scale for the Peugeot-General Motors alliance, when the two partners are scheduled to produce 700,000 annual vehicles together, saving $1.2 billion a year split between Opel and PSA from 2018 onwards.

Peugeot 2008 China 2014The Dongfeng-PSA joint-venture will produce the 2008 in China later this year.

Finally a few weeks ago, 12 years after launching a manufacturing joint-venture with Chinese automaker Dongfeng to produce cars locally, PSA unveiled a $4 billion capital increase in which Dongfeng and the French state will each get a 14% stake. The founding Peugeot family’s holding will fall to 14% from its current 25% stake and 38% of voting rights, short of the 33% required to veto decisions. This reinforced alliance has left some experts skeptical, as vastly divergent interests between PSA, Dongfeng and the French state could create more instability for the carmaker.

However this is a very welcome cash injection for PSA that will enable it to pursue aggressive development plans in Asia where the brand has launched in no less than 13 countries over the past 18 months, as I described in my recent article about Peugeot’s Mongolian operations. PSA also has a joint-venture with Changan since 2012 to produce upscale DS models locally, which we will analyse in more detail in the “Luxury segment” section of this feature article.

Dacia Logan II. Picture courtesy of largus.frDacia Logan II

4. Low cost cars

This is potentially where the two French manufacturers’ strategies differ the most at the moment. A precursor in this domain, Renault launched the low cost Dacia Logan in 2004, originally for emerging markets only but eventually for Western Europe as well. Fast-forward 10 years and Renault has produced over 5 million units of its low cost range, including one million in 2013 alone, in every corner of the globe. Standardisation and simplification are pushed to the extreme, with significantly lower manufacturing costs resulting in a very impressive 10% profit margin for the Duster for example, even though it is sold at a dirt cheap price. Renault has also used its low-cost knowledge to relaunch Datsun as Nissan’s entry range.

Peugeot 301 Spain production. Picture courtesy of betterparts.orgThe Peugeot 301 is currently produced in Spain and China.

PSA has not launched any low-cost models yet. The Peugeot 301 and Citroen C-Elysée are produced in Spain for Eastern European and African markets and in Wuhan for the Chinese market, and PSA insists they are not low-cost. The 301 has been met with outstanding success in Northern Africa last year: #2 in Algeria#5 in Tunisia and #10 in Morocco with worldwide sales for the twins hitting 100,000 units in 2013 and a predicted 250,000 for 2014. Profit-wise, a PSA internal source confessed to the French website La Tribune that “margins are virtually non-existent, we aren’t even sure we will ever make a profit on these models”. Which may not matter too much in the first place. With the 301, Peugeot is regaining a foot in Africa, a continent it had abandoned (to my bafflement) but where it still benefits from an extremely strong brand image, and a huge, untapped source of new customers.

Finally, and this is potentially the most interesting development and the biggest question mark so far, its new reinforced alliance with Dongfeng could potentially spark PSA’s real landing in the low cost world. The fourth new factory for the PSA-Dongfeng joint-venture is being planned, and it would be dedicated to the production of Dongfeng’s entry models, branded Fengshan. There has been talk of yet another new factory dedicated to low-cost models and located this time at the periphery of Europe. It doesn’t take too much thinking to guess the logical next step – PSA using the Fengshan brand as its low-cost offering, a la “Dacia by Renault”. This would definitely be a clever outcome of the alliance with Dongfeng, as Peugeot’s ‘guarantor’ role could alleviate European consumers’ pre-conceived ideas about China-manufactured cars, as Renault did with Romanian vehicles.

Stay tuned for Part 2 of this special Report, covering the Luxury segment, Perceived Quality and Brand differentiation.

Matt Gasnier is based in Sydney, Australia and runs BestSellingCarsBlog, a website dedicated to counting car sales around the globe.

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15 Comments on “Best Selling Cars Around The Globe: What Future For French Manufacturers?...”

  • avatar

    I do agree Renault gave up on AMC. If they stuck around a few more years they would have been golden.

    They put in all the hard work into creating the Cherokee whose sales took off not long after the 4.0L was shoehorned in right before Renault pulled the plug.

    Not to mention the Eagle Premier which is a direct ancestor of Chrysler’s current RWD cars. The brand new Canadian plant was a great buy as well.

    • 0 avatar

      Had a ’99 XJ with the AMC 4.0. Little torque monster.

      It was problem-free right on up until I killed it, submerging it crossing a much deeper than I had anticipated mid-Missouri stream. That bastard went down like a champ. Had to swim out of the driver’s seat.

      Yes, it was absolutely and freakishly reliable. Stood up to torture from me that I to this day cannot comprehend.

      I’d give my soul to resurrect it and still have it with me.

      Now the Eagle Premier/Dodge Monaco, on the other hand… uh… not so much of a gift to the automotive world.

      My folks had a 90 (or 91?) Premier. Loaded to the hilt. Charcoal over burgundy. Push buttons everywhere.

      I remember the boxy shape, the smooth way it rode and handled, the ridiculous hoards of buttons, and the weird thing it said on the fender. “Design Guigario” or something of that sort. It was definitely cool at the time.

      It lasted a whopping six months, and when the PRV kicked the can, it did so to the extreme. My folks lost their a$$ so badly, they considered legal action.

      What a pile. Good riddance.

      • 0 avatar

        Yeah drive train crap. I think DeLorean also had that horrible v6.

        Good thing Chrysler converted the 4 speed ultradrive, to longitudinal front wheel drive. Some of the Chrysler v6’s weren’t bad minus the ohc ones that sludge up.

        LH cars are evolved from those two models and LX from LH.

    • 0 avatar

      Onus, you got the right idea. The Cherokee is much more French than most navel gazing American über alles will ever imagine.

      • 0 avatar

        Exactly. But, its was quite the wonderful creating. I think its why people loved it so much. Crude it is today but, then it was a great creation and IMHO rides dang good for being solid axled on both ends.

        François Castaing <- this wonderful french guy was essential in the Cherokees development.

    • 0 avatar
      Big Al from Oz

      You are correct about the AMC 4 litre inline six. I think to shoehorn the engine into the Cherokee the water pump was taken off the front of the engine and moved to the side. Also, (in Australia) in 96 I remember Chrysler removed the cast iron pistons and used aluminium alloy pistons. This created a slight power drop.

      I had a 95 Cherokee Sport, it was a dismal vehicle, but the engine and 4 speed auto were the only items that were bullet proof. When it worked it did quite well off road.

      • 0 avatar

        Sounds about right. The Aisin Warner transmission seems to hold up well. Engine doesn’t complain unless your run it out of oil. The rest is junk. especially on your 95 which is filled with Chrysler parts. My mom has a 98 Grand Cherokee identical platform, engine, axles, etc. Minus the transmission which is a Chrysler unit. I’m always fixing something on that. Transmission is currently on its way out and it stalls on my mom. ECU had to replaced, crank position sensor, fuel pump, alternator, transmission cooler line blew not long after we got it. Probably many more things i can’t remember.

        The water pump is still on the front. But, they couldn’t run a traditional fan setup the fan is offset to one side. They had an electric one as well on the other side. Some firewall modification was done too.

        The engine was refreshed from the old amc 6s with a new head design that flowed a ton more air. People say the 4.0 is torquey but to me it feels like a rev happy engine. The specs on bore and stroke point in this direction too.

  • avatar

    Well, my dad actually owned a French car – a ’73 Citroen SM – and I could have told you what the future held for them 40 years ago…

    Worst. Car. Ever.

  • avatar

    What is the Renault-based Mitsu that’s coming to the States?

  • avatar

    Interesting, thoughtful article. Let’s hope the best for PSA. Perhaps the Peugeot RCZ (not sold in the US) is worth mentioning, too (c.f.

  • avatar

    The short answer, Peugeot is as stupid as stupid can be. If it doesn’t get its act together, like yesterday, it’s just a matter of time before it’s gone. Now Renault is smart. It has a global presence and a portfolio of brands that strike a pretty good figure across the potential buying scope. From Dacia to Nissan, everything is looking up. They are fine, the 4th largest maker in the world and could get up there and challenge the big global 3 with a couple of hits.

    Renault: Keep at it. Peugeot: Re-think the idiocy.

    • 0 avatar

      Hey Matt, just to elaborate a bit more.

      I think PSA doesn’t need a low cost brand. In Latin America, Renault Brands Dacia cars as Renaults or Nissans and does ok. What PSA needs are cheaper products and more updated products. They still don’t have a 1.0 engine for example. 1.0 cars make up at least 50% of the market here. So 1.5 million cars that Peugeot simply doesn’t compete. I don’t know about the rest of the world, but here Renaults are fast gaining a reputation as easy and cheap to maintain cars. The dealerships are considered from average to better than average. Peugeot meanwhile still has a perception gap. In other words, the jury is still out and though swear by their reliability and durability, most still don’t see it that way. PSA has a way to go there and for that they’d need the dealers. But PSA dealers un Brazil at least are almost universally considered worse than average. Lots and lots of work there.

      FInally the products. THe middle offerings are universally liked but people balk at buying them due to strong competition and the reputation. Pricing is aggressive though and if they prove reliable, they could get back in that came. A word to Peugeot, the 208 is not a luxury car. If it’s going to be your volume car here, lower the price. Where’s the 301? In Brazil compact sedans have been the fastest growing market segment and there’s a hunger for cars like this. The 207 simply doesn’t cut it anymore.

      Cant wait for the second part Matt!

      • 0 avatar

        Hello Marcelos,

        you are wrong on one point:

        PSA already has a 3 cylinder engine. It has 1.2 litres and is already available over here in Europe.

  • avatar

    Had a Peugeot dealer here on Cape Cod, into the mid 90’s. Worked for a customer, who always bought Peugeot wagons,…..never, ever remember many Renaults…. except around Boston….French cars are certainly an acquired taste, but they add a variety [ automotive wise]…that I fear is slowly disappearing….

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