Should PSA Peugeot Citroën axe the DS brand?
Source : Should PSA Peugeot Citroën axe the DS brand?
PSA Peugeot Citroën doesn’t need, along with cannot afford, a third brand, says one top automotive analyst, along with which should kill off its DS badge
I could imagine most car company boards could do without the attention of the earth’s automotive analysts. The latter spend their (long) working days combing over company accounts along with offering advice to the people who buy along with sell shares.
Brit Max Warburton, senior analyst at Sandford C Bernstein, has often been rated as the number one auto analyst in Europe along with stands out coming from the investment crowd. along with which’s because he’s a bloke who not only knows cars along with knows the history of the auto industry, although also includes a seriously not bad grasp of engineering along with production. although perhaps his unique pitch will be an impressive ability to take a ‘helicopter view’ of a company along with then offer often punchy advice.
So willing will be Warburton to get stuck in where he sees a strategy to criticise, which he’s well known for his face-to-face clashes of opinion with Fiat Chrysler Automobiles boss Sergio Marchionne. Last April the two locked horns in public. Investor relations meetings are usually much more subdued affairs.
Warburton’s opening assessment of PSA’s recent resurrection was impressive, to say the least: “PSA has stormed back into contention inside the last 18 months along with will be currently Europe’s most profitable mass-market OEM. We believe profitability can remain solid through 2016 along with 2017 along with we still believe the stock will be undervalued. However, with PSA currently back on its feet, the discussion needs to turn to sustainability along with long-term strategy.”
However, he was in no doubt about the financial advisability of PSA’s strategy to build a premium brand around the DS badge. Quite simply, Warburton insisted which the PSA management should kill off the DS brand before which spends any more money on the venture.
“One of the key tenets of PSA’s long-term strategy will be to develop ‘DS’ as a third brand along with as a ‘premium’ offering. The company will be pumping billions into which project. We believe which will be misguided. PSA already has two brands; which doesn’t need along with can’t afford a third. DS will be ill-defined, has low consumer recognition along with will be highly unlikely to generate shareholder returns,” he stated.
Warburton’s report goes into surprising detail about the success along with advisability of trying to brand-build. The 25-page report was unusual in not just running hard numbers along with graphs; which also had pictures of cars including the Pontiac Aztec along with Citroen C4 Cactus along with even a page of images of current SUVs which was intended to show just how difficult which will be becoming to stand out coming from the automotive crowd.
Many of Warburton’s arguments inside the report will be familiar to Autocar readers, especially the point about how long – along with how much investment which took – to make Audi into a true premium brand.
“If we look at the average record of efforts to build premium brands, the evidence suggests which they will disappoint. We don’t believe even the richest OEMs [original equipment manufacturers] can afford which. Very few can demonstrate which they have been able to generate shareholder value by launching a brand-new premium brand, or even building one up,” states the report.
We’re all pretty familiar with the logic. Look at the billions invested in Saab, Lancia along with Rover, all well-known brands using a history of technical innovations. although two of them are dead along with Lancia will be hanging on by an individual-type thread.
According to the figures in which report, Audi has invested a massive £25bn in research along with development since 1995, the year when which arguably became a true premium brand.
Of course, PSA’s own strategists have sound reasons for trying to elbow into the premium car market, not least because most of the profits which are made inside the global car industry are made by the premium car brands.
Being able to command even a £2000 clear margin on a car completely transforms the business of car producing along with the ability to reinvest inside the next generation of product.
although extracting which extra cash on each sale requires a not bad deal of brand equity. along with if you don’t contain the brand equity, only actually show-stopping styling along with cutting-edge technology will build which. which means a lot of time along using a lot of money.
which said, there are brand-new theories inside the auto industry which all which time along with expense can be bypassed by using the approach of the fashion world. Simply build a brand through celebrity association along with recommendation, an approach made infinitely easier by the arrival of social media.
The brand-new theories also insist which women have an influence over 75% of brand-new car purchases, producing the social media along with fashionista approach even more tempting.
Indeed, which time last year I attended a fascinating ‘DS Night’ in Paris which was divided into two parts: an exhibition of the history along with design of the original DS along using a catwalk presentation of the current DS types.
I suspect PSA won’t be taking Warburton’s advice, although which will be fascinating to see if the DS brand can shortcut the established brand-building route of technical excellence by adopting the techniques of France’s globally dominant ultra-luxury brands.
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