New product is a big driver of performance in the automotive business, as we are all very well aware. Create a hot product, something that hits a market sweet spot – design, price and overall package – and an OEM is well on the way to competitive advantage. Managing your cost base, market geography and getting the right manufacturing footprint will count for little unless customers want to buy the OEM’s end-product, feel some level of desire for it and the values that are associated with the automotive brand.
Small SUVs/Crossovers – eg Renault Captur, Ford EcoSport, Peugeot 2008 – seem to be a hot segment (in Europe) at the moment. Not so long ago it was B-Segment-based MPVs. In three years’ time, it will be something else.
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The thing is, to be successful, the new product has to be very good. And spreading resources thinly to claim a raft of new products is definitely not the answer. That’s dilution. Not only does it suggest low average spend on each model, but it can also confuse the customer on brand image. Does the range stand up as a coherent mix, with consistent market positioning? Are design themes clear? What does the brand stand for?
Resources have to be targeted, platforms and powertrains optimised, to give the best return on investment. And new product needs to be developed with the brand strategy firmly in mind, newly developed product and brand values reinforcing each other.
When Carlos Tavares took the big job at PSA Peugeot Citroën, he must have considered how he can have a positive impact, what the company needs to be more successful and where the gains to make it more competitive can come from.
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One obvious starting point is to take a look at the product catalogue and consider how many models are really needed to support more clearly defined brand strategies. He has done that and set a target for rationalisation. Good move.
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By GlobalDataThere are also potential gains to come from working much more closely with Chinese partner Dongfeng. He has his Renault-Nissan Alliance experience to help on that, but I suspect dealing with Dongfeng in 2014 will be a little different to dealing with Nissan after it was rescued from the brink by Carlos Ghosn in 1999.
Ghosn, by the way, took the axe to Nissan’s cost base to turn the company around quickly. Nissan, back then, was on its knees. The difficult restructuring medicine was not popular at first, but Ghosn became a hero when he succeeded in turning loss to profit. One difficult question for Carlos Tavares will be how much room he has to play with on the cost side. With the French Government also installed as a shareholder now, shutting more plants in France appears to be ruled out. That means the performance levers elsewhere in the business will have to work very well indeed to turn the company around. There is no quick cost-cutting solution if Europe’s sluggish car market continues to act as a big drag on the bottom line. So, no pressure, Mr Tavares.
FRANCE: PSA to slash model range as part of new business plan
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