France Thinks It Can Return to U.S. Auto Market On a Shoestring Budget

Matt Posky
by Matt Posky
france thinks it can return to u s auto market on a shoestring budget

Since acquiring Opel and Vauxhall from General Motors, France’s PSA Group has dropped not-so-subtle hints that it wants back into the American market. Chief executive Carlos Tavares said the group is already engineering upcoming models to meet U.S. regulations. “That means that from three years down the road we’ll be able to push the button, if we decide to do so, in terms of product compliance vis-a-vis the U.S. regulations,” he explained during the Frankfurt Auto Show.

That means Citroën and Peugeot should have a few vehicles ready for export after 2020. However, selling them won’t be a piece of cake. PSA doesn’t have an established dealer network in the United States, nor does it have a corporate friend in the industry that might allow the company to borrow one.

Still, the European auto group doesn’t seem all that worried. Rather than worry about asking its automotive neighbors to loan it a cup of sweet dealership sugar, it noticed a lot of people prefer aspartame and acesulfame potassium. PSA plans to take a modern, tech-focused, affordable approach to the problem.

“We see the high cost of doing this business; we see the challenges that exist in profitability for dealers and OEMs,” PSA North America chief Larry Dominique told Automotive News last week. “We believe with the new tools, the new technology, the new customer expectations, there are leaner, more agile ways to do this.”

Establishing a dealer network of one’s own is ludicrously expensive. PSA doesn’t want to gamble on it, in the event America buyers aren’t responsive to what it’s offering. Tesla Motors faced a similar problem when it started selling cars — a problem it resolved through online sales and delivery centers. Chinese manufacturers are toying with similar concepts, pitching app-based sales as a way to circumvent dealerships entirely.

Dominique stressed that no official decision has been made at PSA. In fact, we don’t even know which brands it intends to send in America or what kind of timetable it’s working with. But he did say that, if the group decided to go with physical dealerships, the company would take great strides in implementing tech that would keep them profitable. “The world is changing around us from a standpoint of the way the people buy and engage in purchases,” said Dominique.

As a former TrueCar executive, it’s understandable that the CEO would stress the importance of a digital solution. TrueCar initially positioned itself as a way to ensure customers were getting the best deal on a vehicle. However, that model didn’t turn out to be entirely profitable and the company gradually shifted its emphasis toward dealerships (which started to really take off around the time of Dominique’s departure).

Engaging consumers while keeping dealerships happy is an utterly brutal balancing act. But TrueCar provides a valuable lesson — digital car sales have continued growing despite the hardships. A majority of industry analysts are comfortable suggesting roughly 10 percent of all U.S. vehicle transactions could occur online by 2019.

Meanwhile, dealership expenses (as a percentage of total sales) rose to 98.7 percent last year, according to National Automobile Dealers Association data. Average losses on new vehicles ballooned to $421 per car, against $22 per car in 2015. This isn’t abnormal; stores sometimes lose money when the market sucks, only to come back with record-setting profits a few years later. But dealerships losing money helps fan the flames that tech will come in and flip the table — ushering in an entirely new era for the auto industry.

“We need to find a way to reduce our fixed costs,” Dominique said. “We want people to make a profit selling a new car.”

We would urge everyone to remain cautious around the presumption that a digital solution is the only answer to the changing market. Whether you love or hate them, dealerships aren’t going to vanish overnight. But there could be an opportunity here worth taking advantage of here. Digital sales could be a stepping stone until PSA feels safe in setting up brick-and-mortar storefronts in America.

“One of the things we are studying right now is, how can we best balance this — make a better customer experience, more seamless, more online, but also provide the right access to the services and the physical elements when you need them?” Dominique added.

Likewise, it would be foolish for any automaker to ignore tech-based solutions. Not just because it could make them money, but because practically everyone else is already trying their hand. In addition to the proposed digital sales, PSA has already launched an all-in-one transportation application called Free2Move. The app allows customers to hail a ride, pay for mass transit, book a car, and more via a single platform. It’s clever and just the sort of thing other big automakers are trying to create to keep customers engaged with their platforms (and from straying to the competition). PSA intends to launch a similar app for the American market eventually.

As for the cars, PSA hasn’t said much. We know it wants to minimize set-up costs wherever possible, swapping to digital solutions without alienating customers. However, we haven’t really heard anything about tangible product. That should change by winter.

“At the end of this year, we are going to make things a lot clearer relative to [product] timelines,” Dominique said. “By early [2019], we are going to be working more toward the next phase of selling retail, not just planning.”

[Image: Groupe PSA]

Join the conversation
3 of 68 comments
  • Cheezman88 Cheezman88 on May 17, 2018

    With a picture like that? Lol. Oh boy, I can only imagine what the average American would have to say about that one.

    • Turf3 Turf3 on May 18, 2018

      Well, apparently looking like a ballerina in a suit that's too small is now de rigueur for male models in advertisements.

  • Ra_pro Ra_pro on May 17, 2018

    When I was in France a decade or so ago the guy who was my business host said that even French don't like French cars. And sure enough he went out and bought a VW.

  • SilverCoupe I am one of those people whose Venn diagram of interests would include Audis and Formula One.I am not so much into Forums, though. I spend enough time just watching the races.
  • Jeff S Definitely and very soon. Build a hybrid pickup and price it in the Maverick price range. Toyota if they can do this soon could grab the No 1 spot from Maverick.
  • MaintenanceCosts Would be a neat car if restored, and a lot of good parts are there. But also a lot of very challenging obstacles, even just from what we can see from the pictures. It's going to be hard to justify a restoration financially.
  • Jeff S Ford was in a slump during this era and its savior was a few years away from being introduced. The 1986 Taurus and Sable saved Ford from bankruptcy and Ford bet the farm on them. Ford was also helped by the 1985 downsize front wheel drive full sized GM cars. Lincoln in 1987 even spoofed these new full size GM cars in an ad basically showing it was hard to tell the difference between a Cadillac, Buick, and Oldsmobile. This not only helped Lincoln sales but Mercury Grand Marquis and Ford Crown Victoria sales. For GM full size buyers that liked the downsized GM full size 77 to 84 they had the Panther based Lincoln Town Cars, Mercury Grand Marquis, and Ford Crown Victorias that were an alternative to the new GM front wheel drive full size cars that had many issues when they were introduced in 1985 and many of those issues were not resolved for several years. The Marks were losing popularity after the Mark Vs. 1985 was the last year for the rear wheel drive Olds Delta 88 and rear wheel drive Buick Lesabre the rear wheel Caprice and Caprice Classic 3rd generation continued till 1990 when it was redesigned. B Body Buick Estate wagons continued thru 1990 as the Olds Custom Cruiser wagon and both were redesigned. GM held onto a few rear wheel drive full size cars but the Lincoln ad really brought home the similarly looking front wheel drive full size cars. Lincoln's ad was masterful.
  • SCE to AUX Toyota the follower, as usual. It will be 5 years before such a vehicle is available.I can't think of anything innovative from them since the Gen 1 Prius. Even their mythical solid state battery remains vaporware.They look like pre-2009 General Motors. They could fall hard.