Blog: Why PSA might be on to something with the DS brand
Dave Leggett | 25 January 2016
Pretty big turnout under the glass pyramid at the Louvre
I got to visit the Louvre museum in Paris last week with PSA Peugeot-Citroen. It was a pretty lavish affair for a facelift to the DS 3 model, but the scale of the event and the lavishness points to how important the premium DS brand is to PSA. There is no shortage of cynicism among some in the media who see no room for a separate premium brand for PSA in a market that is already crowded. Why would someone in the market for an established premium marque vehicle go for a DS?
There are different ways to look at this. Ford’s approach with its Vignale sub-brand is in some ways similar. You identify a near-premium customer, a customer who is perhaps in the market for a vehicle with premium brand characteristics but also after some value. The volume player can offer a highly equipped car with some premium touches at a competitive price while also leveraging hidden scale economies on platform and other major components that are shared with the car’s group volume relations. In theory, it should be possible to offer the car at a transaction price that, while below, say, Audi, offers a much higher margin than PSA can achieve on a Peugeot or Citroen.
If you add in an international strategy to add incremental sales in emerging markets, the project makes even better business sense in terms of long-term profitability for the group. Emerging markets can be especially fertile hunting grounds for ‘new’ brands (well, DS is kind of new and old, because of the DS heritage) that offer the right product at the right price and with the right image. Brand legacy is sometimes less important than you might think (look at the success Infiniti has had in Russia).
PSA does have a decent shot with the DS brand. It can acquire some new customers around the world. And even if there is a degree of cannibalisation, shifting a higher margin DS over a Citroen or Peugeot would still benefit the PSA bottom line. The key has to be that the cost of adding DS models is contained so that the bigger margins are achieved. And, critically, the customer still has to have the genuine feel of a premium experience with DS. Considerable thought has to go into that. I can see why PSA chief Carlos Tavares has gone for the ‘third brand’ option, rather than sub-brand, as it reinforces both product and brand differentiation. It’s a bold move, but one that could boost PSA’s long-term prospects, in theory. There’s just the small matter of execution ahead.
Here’s an interview with Carlos Tavares that we published a few months ago. It’s a good update on the big picture and the turnaround project at PSA.
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