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]

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  • 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.

  • Analoggrotto By the time any of Hyundai's Japanese competitors were this size and age, they produced iconic vehicles which are now highly desirable and going for good money used. But Hyundai/Kia have nothing to this point that anyone will care about in the future. Those 20k over MSRP Tellurides? Worn out junk sitting at the used car lot, worn beyond their actual age. Hyundai/Kia has not had anything comparable to the significance of CVCC, 240Z, Supra, Celica, AE86, RX-(7), 2000GT, Skyline, GT-R, WRX, Evo, Preludio, CRX, Si, Land Cruiser, NSX etc. All of this in those years where Detroiters and Teutonic prejudiced elitists were openly bashing the Japanese with racist derogatory language. Tiger Woods running off the road in a Genesis didn't open up a moment, and the Genesis Sedan featuring in Inception didn't matter any more than the Lincoln MKS showing up for a moment in Dark Knight. Hyundai/Kia are too busy attempting to re-invent others' history for themselves. But hey, they have to start somewhere and the N74 is very cool looking. Hyundai/Kia's biggest fans are auto Journalists who for almost 2 decades have been hyping them up to deafening volumes contributing further distrust in any media.
  • Bd2 Other way around.Giorgetto Giugiaro penned the Pony Coupe during the early 1970s and later used its wedge shape as the basis for the M1 and then the DMC-12.The 3G Supra was just one of many Japanese coupes to adopt the wedge shape (actually was one of the later ones).The Mitsubishi Starion, Nissan 300ZX, etc.
  • Tassos I also want one of the idiots who support the ban to explain to me how it will work.Suppose sometime (2035 or later) you cannot buy a new ICE vehicle in the UK.Q1: Will this lead to a ICE fleet resembling that of CUBA, with 100 year old '56 Chevys eventually? (in that case, just calculate the horrible extra pollution due to keeping 100 year old cars on the road)Q2: Will people be able to buy PARTS for their old cars FOREVER?Q3: Will people be allowed to jump across the Channel and buy a nice ICE in France, Germany (who makes the best cars anyway), or any place else that still sells them, and then use it in the UK?
  • Tassos Bans are ridiculous and undemocratic and smell of Middle Ages and the Inquisition. Even 2035 is hardly any better than 2030.The ALMIGHTY CONSUMER should decide, not... CARB, preferably WITHOUT the Government messing with the playing field.And if the usual clueless idiots read this and offer the tired "But Government subsidizes the oil industry too", will they EVER learn that those MINISCULE (compared to the TRILLIONS of $ size of this industry) subsidies were designed to help the SMALL Oil producers defend themselves against the "Big Oil" multinationals. Ask ANY major Oil co CEO and he will gladly tell you that you can take those tiny subsidies and shove them.
  • Dusterdude The suppliers can ask for concessions, but I wouldn’t hold my breath . With the UAW they are ultimately bound to negotiate with them. However, with suppliers , they could always find another supplier ( which in some cases would be difficult, but not impossible)