The UK launch of Peugeot’s 208 ‘hot hatch’ sports variant – the 208 GTi – was accompanied, understandably, by some looking back at the brand’s widely respected history in that area of the market.
In particular, the Peugeot 205 GTi, launched in 1984, was a hugely popular model that caught the wave of interest in performance hatchbacks during the 1980s. It was small, lightweight and quick. Being based on a B-Segment model meant that it was smaller and lighter than C-Segment-based variants of the time such as the Volkswagen Golf GTi, Vauxhall/Opel Astral GTE and Ford Escort XR3i. Rally-style seats, alloy wheels, class-leading handling and eventually adding a 130bhp 1.9 litre engine all helped to cement the car’s reputation as a leading and affordable performance hatchback. When it finished in 1994, there was no direct successor as Peugeot reconfigured its small car range into the smaller 106 and larger 306 (albeit both coming with GTi versions). Peugeot eventually realised that it was a mistake to abandon the B-Segment and the 206 range was introduced in 1998 (a 206 GTi variant arriving in 1999).
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The 205 GTi helped to change the Peugeot brand image in the eyes of many: a Peugeot could be a car for the enthusiastic driver. That was a theme that Peugeot would return to in subsequent advertising campaigns. After the 206 GTi and 207 GTi, the 208GTi is the latest in the line now coming to market in the UK following the European launch of the mainstream 208 variants last year.
Peugeot maintains that the 208 range has been very successful in the European car market, with some justification. It says it has produced over 330,000 in its first year and that the model is performing very well versus the competition. The B-Segment is one of the most competitive in the European market and it’s a segment attracting a lot of interest in a car market that is declining. Besides the 208, the Ford Fiesta has recently had a mid-cycle upgrade and Renault has introduced Clio 4. Expect to see a new Volkswagen Polo at the Frankfurt Show in September. JATO data shows that the Peugeot 208 climbed the European sales chart in 2012 after launch, demonstrating PSA’s ability to deliver a highly competitive and desirable product even against unfavourable market geography as its home market deteriorated.
Let’s not forget that these are very tough times in Europe for the OEMs in general. Overcapacity is looming large in a West European market that has lost over 3m units from its 2007 peak. Even Ford – widely considered to be a relatively strong volume player and performer in Europe – is expecting to lose $2bn in Europe this year. That’s how bad things are. The PSA Peugeot Citroen Group is seen as one of the weaker OEM groups because of its high degree of reliance on its European business and car markets being hard hit by Europe’s economic crisis. It posted an eye watering loss of EUR5bn for 2012 (albeit skewed by big write-downs) and the plan to shutter the Aulnay plant has provoked much controversy in France (where Renault has been cowed into pledging to keep plants open). The benefits of an announced strategic alliance with General Motors will take some time to appear on the beleaguered bottom line.
Peugeot UK managing director Tim Zimmerman stresses two elements in PSA’s strategy: internationalisation and the ‘move up market’. He talks enthusiastically about both from a position informed by plenty of experience, including a stint in China. “The current problems in Europe highlight the importance of being global,” he acknowledges. “It is essential to have success internationally and we have invested in places like China and Russia to do that and to reduce our dependence on any one region. In the first quarter some 44% of our sales [PSA Group] were outside of Europe.”
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By GlobalDataMarket geography is a tough issue for vehicle manufacturers to deal with – it takes considerable time and investment to change where you make and sell cars. The winds of the global economy can blow favourably or not and are a fixed given for all. The global economic weather is currently rather inclement for PSA, to say the least.
Operationally speaking, costs, investment and new product are things that a car company can more easily control in the shorter-term. “In 2012, we achieved EUR100m in cost savings and that allows us to invest,” Zimmerman says. “And we have never had a series of launches like we have now.”
The 208 GTi is obviously something of a halo product in a core market segment for Peugeot. “The volume importance is never going to be huge,” Zimmerman acknowledges. In a full year it might make 2,000 sales in a British car market that absorbs 40,000 Peugeot 208s. “The importance of the 208 GTi is for its halo effect and what it says about our brand, how we are moving.”
Zimmerman picks up the theme on moving the Peugeot brand upmarket. “Quality is the entry point. You have to get that right in areas like fit and finish, alongside good design and creating a real desire for a product that is truly competitive. We are trying to take Peugeot to a higher level with 208 and the GTi is a fabulous car to be able to offer in the range.”
He characterises the space in the market that Peugeot seeks to occupy as “premium generalist”, enabling Peugeot to achieve higher prices, especially in the retail area of the market where it is concentrating its efforts. “We are improving the quality of our business,” he claims. “We are not about the fast-churn fleet area – we’ll leave that lower margin business to others.”
Peugeot is also trying something new with the 208 range, which it sees as related to the GTi and part of the strategy to take the brand upmarket. There is also a 3-door-only variant called ‘XY’. If the 208 GTi is about high-tech sport, the 208 XY is more about ‘high-tech luxury’. The idea is to develop an up-spec and luxury feel variant that replaces the 3-door Feline version and comes with more equipment.
Peugeot sees the XY hitting a new market niche in the hard-pressed car-buying households of post-recession/austerity Europe. “There is a trend to downsizing that the XY addresses in an interesting way,” says Zimmerman. “This car offers luxury and refinement in a B-Segment vehicle that can work very well in number of market settings – city cars for example. You can have the practicality and compact footprint that comes with the 208, but with a luxury specification; we can deliver a premium experience in a supermini-class small car.”
The XY comes with a panoramic glass roof, sat-nav, DAB radio, alloy wheels, luxury seats as standard. There are also a number of styling elements – for example in the directional indicator lights and the instrumentation display – designed to convey a premium feel. Much was made of some purple colour theming, which I am not so sure about (but it is not a gender play, more use of colour purple to convey a sense of stand-out premium). There are also options for things like park assist as well as a diesel engine (with stop-start – and just 98g/km CO2 – not something that the 1.6 petrol engine on the GTi comes with). There are also personalisation options. It will certainly be interesting to see how the XY variant – and Peugeot’s take on premium – fares. The XY comes in at over GBP2,000 less than the GTi (on the road GBP16,545 versus GBP18,895).
The XY may well find buyers who are urban-based and looking for a premium level of specification. The demographic? Well, a little bit older than the 208 GTi perhaps, but the population is ageing isn’t it? This could catch the ‘grey wave’ perhaps. With household budgets under pressure and the economy where it is, it could be something that will hit a spot in the private retail area. As Zimmerman helpfully points out, the average age for the new car buyer in the UK is over fifty. Buying brand new cars as a private retail customer, let’s just remind ourselves, is mainly not a young person’s game.
There’s also another interesting observation on how the UK new car market works for Peugeot. Just why is the private retail area doing so well, generally, I ask Zimmerman. The UK car market continues to apparently defy gravity while national markets on the European continent go into sharp decline. Part of the answer lies in the economic situation, of course. The eurozone crisis and its associated uncertainties have left continental consumers severely spooked. The UK economy may not be firing on all cylinders, but the situation elsewhere is even bleaker. But that’s not the whole story.
‘Manufacturer led’ is sometimes cited as an explanation for market growth, implying that there are some great deals out there, beggar-thy-neighbour offers and metal being pushed with discounts, ‘dealer pre-registrations’ and so on. Hence the losses being chalked up by the big volume brands in Europe. There are undoubtedly some great deals for new cars around, but that’s not the whole story on how manufacturers are eking out sales in the retail area of the market.
“More of our retail customers are going for lease-type agreements for purchase now,” says Zimmerman. “As the contract periods expire, we naturally point them in the direction of a replacement. It is working very well to support sales.” How many of Peugeot’s UK retail customers are buying cars under such contract schemes (‘passport personal contract’)? The answer surprised me. It’s over 60%, Zimmerman said. That creates a pretty substantial natural reservoir of replacement demand for the brand.
And with the XY variant introduced on top of an array of other trim levels designed to hit particular market sweet spots, Peugeot has added another offering in its product portfolio with which to tempt the retail customers on lease agreements to sign up for a new car on another fixed term contract.
The 208 GTi is a very nice car. It seemed to get the thumbs-up from the media colleagues I spoke to who are more used to first drives than me. It ticks the boxes in the hot-hatch area (0-62mph 6.8secs, max speed 143mph) and provides evidence of good evolutionary design and engineering execution at Peugeot. It provided all of the expected high revving fun on the roads of north Wales where we tried it out. Gearbox ratios, tick. Power on demand, tick. Cornering sure, tick. All things considered, a neat and practical package, but it’s not a high-volume variant, it’s a halo car. I suspect a fair proportion of the buyers will be people old enough to remember the pleasures of the 205 GTi back in the days of power shoulders and cell phones the size of a brick. For those who want a premium feel but don’t need the sports performance and want a slightly softer ride, there’s the XY, quietly also building those premium brand values if the residuals turn out to be as good as Peugeot hopes.
PSA may be a company facing some pretty severe challenges, but the latest variants of the 208 show that it is thinking hard about where it fits in to the automotive landscape, while also making the most of some valuable heritage.
With all the commendable talk of the heritage and the 205 GTi, how does the future look? What will follow with next generation B-Segment for Peugeot? There’s the small matter of an alliance with General Motors to consider.
A look at just-auto’s PLDB reveals that “the Citroen C3 replacement is expected to be the first car to use the ‘upgraded low CO2 small car platform for Europe and other regions’ which GM and PSA announced they were co-developing in October 2012. The next Peugeot 208, Citroen DS3 and Opel/Vauxhall Adam should also use this architecture.”
The development of that small car platform – and the broader alliance between the two groups – will be something to watch closely. Peugeot has something to be protective about and will certainly want to ensure that the successor for the 208 continues to build on the established success and strengths of the current model, including the latest variants. GM, one hopes, will – now that it has commited to investing in Opel/Vauxhall – work rather better with PSA in its strategic alliance than it did on engines with Fiat.
