Citroën will adapt for success in UK market - MD, Citroën UK

By Dave Leggett | 19 December 2016

Bek Hassan relishes the challenges ahead for Citroën and DS in the UK car market

Bek Hassan relishes the challenges ahead for Citroën and DS in the UK car market

Bek Hassan, Managing Director - Citroën & DS Automobiles UK, talks to just-auto about the opportunity ahead for the two brands in the UK car market, despite current 'challenging times'.

Before taking the position of heading up Citroën and DS in the UK car market, Bek Hassan was sales director for Peugeot in Turkey. It was an experience that he says has stood him in good stead to deal with any challenges in the UK.

"Turkey has an interesting dynamic. It was very changeable in the four years I was there," he says. "It certainly highlighted the need to be versatile and flexible when things are changing around you. "

The UK vehicle market certainly has its own set of challenges right now. The Brexit referendum has sent the pound down versus the euro by around 10% and raised concerns over the outlook for the UK economy. Importers - such as PSA - are considering price hikes in the context of a car market that looks ripe for a downturn from its current record level of sales (the UK car market will hit a new record this year - 2.7m sales). The competitive landscape could be ramped up in 2017's declining market and Citroën is also busy separating its Citroën and DS brands. Sales are down and the dealer network is unsettled.

Hassan stresses the improvement in the way the Citroën brand is positioned now versus the beginning of the decade. "Pre-2010 Citroën was very much a discount brand. Offer driven, promo driven. DS made us realise that there is a different opportunity and we have begun to realise this with vehicles such as the C4 Cactus. Citroën and DS in the UK are 40% up in volume terms growth since 2010.

"We sold 120,000 cars and vans last year. C1 is good, Cactus has been a phenomenal success in UK, what it says about the brand. Cactus is helping us on the journey."

Hassan acknowledges that 2015 was a strong market that suited Citroën, but things have changed this year. Sales are down by around 10%.

"2016 has been a challenge, we want to improve our mix. Sales are down, but that's mainly driven by attempts to rebalance the channel mix, raise retail. It is a hard part of the market to develop, and it's very product-driven. C3 will help us."

Hassan maintains that despite the challenges, the Citroën brand is in a good position for the transition that is at the heart of things.

"We're in a good position but we are in transition," he points out. "Besides the channel mix, we're also separating the brands.

"The Citroën brand is obviously well established and we're taking that on a particular path and the brand is evolving - you can see that with models like the Cactus and the new C3.

"DS is different of course, the brand delivers something different and that's a different project."

He acknowledges that the dealer network has had feathers ruffled by the brands' separation. "The combination of trying to improve the mix of our business and the separation of the brands has given us and our network some difficult times that we have to manage - for example, the drop in overall volume that is not in line with the market.

"The separation of the two brands inevitably has caused some hesitation with our dealers. It's something that happens once-in-a-lifetime; it is something new for our dealers and we have some dealers who have been with us a very long time and this is quite a big change.

"We must not underestimate the impact on their mindset and their belief in respect of the brands. And we are working really hard to make sure that the dealers are completely engaged and understand where we are going and what we are trying to do."

Citroën recently took UK dealers to Paris to show them new product and provide some reassurance on the DS strategy. It is, he says, important to demonstrate conviction and that comes about with more than mere words and strategy enunciations . There will still be questions though, he admits.

"We took some of our dealers to Paris a few weeks ago and revealed some of our future DS models. As an investor or stakeholder, when you can see and touch the product that is central to our strategy, it encourages belief and conviction in the strategy. We had a really positive reaction, but of course there are naturally still some questions: will it really work, will it be successful? We believe we are on the right course and we are planning for that, but we do acknowledge that our dealers need some time to develop their approach; we have to support them and carry them with us."

Hassan seems genuinely excited by the near-premium aspirations of DS - but also the dynamic with Citroën that is easily overlooked. "DS is a hugely exciting project and so is Citroen - which will also be standalone. It's exciting in a different way, a different journey, different set of products and a different target audience.

"DS is, effectively, the creation of a brand. It's a challenge but it is also very exciting.

"This year is a time of change for us. We have to open our minds to these brands and the opportunities, the way the market is changing and evolving. Now more than ever, it is necessary to be agile and versatile. Our brand strategy puts us in a stronger position, but it will take time to fully implement."

And that issue of time ahead brings us on to Brexit and the market outlook. Hassan draws on his Turkey experience and the need to be adaptable, but also looks to a bigger perspective. Yes, there are concerns and some uncertainties, but also some certainties when it comes to how a company like PSA looks at a market like the UK in the long-term.

"Are we concerned about Brexit? Yes, because the impact is yet to be clearly defined. Obviously we have had the devaluation of the pound and that has business implications and we understand that. But this is a relatively short-term issue and we are in business for the long-term.

"The UK is a very important market for PSA and our business in global terms. It is the third biggest market for Citroen, third biggest market for Peugeot and second biggest now for DS.

"Whatever happens in the UK will be central and pivotal to the group's strategy. We are ultimately going to do business in the UK because the UK is the second biggest European market, after Germany.  As a global player it is very important to us."

Hassan notes that the post-Brexit referendum impact on the real economy has been muted so far. "We have to manage our business and the impact of exchange rate movements is clear. However, the market itself doesn't appear to have been greatly impacted thus far. It has continued to defy expectations of a downturn.

"We have to be agile and we have to adapt to market conditions. Wherever the market is, we are going to be in it, for sure and we will adapt. "

Part of that adaptation is putting up car prices in the UK due to the impact of exchange rate movements. He sees that as something that the whole industry is having to grapple with. PSA , like others will raise prices.

"We will increase our prices in the first quarter in line with how the market is moving and our business priorities. The commercial pressures are such [given the pound-euro exchange rate] that the whole market will shift their prices up; it's already starting to happen. We will adjust our terms in line with market conditions."

The outlook for next year in the UK? Hassan stresses the need to be adaptable to the needs of the customer in the context of the competitive environment, as well as the importance of having good product.

"Will 2017's market be in line with the current level? I doubt that. Will customers buy at the same level as now if prices are slightly higher? Will manufacturers absorb some of that higher cost? We will do what we need to do to maintain our position. Having good products helps a great deal and we have that.

"We are launching a significant product with C3. It is going to be a big part of our future business and I am glad we are launching such an exciting product in these challenging times."

The UK car market has been driven up by strong promotional activity and PCPs in recent years. Hassan makes a good point that is sometimes lost in the hurly burly of the frenzy to shift the metal. The incentives can only get you so far. They are a tool, but you need to have the product fundamentals in place to properly get the additional leverage that comes with good marketing and promotional activity.  They work together.

"We need to make sure we are driving our business primarily with product supported by  good promotional activity , not the other way round. The market can be driven by good promo sometimes. What we are trying to do is marry some good offers with product that people really want to buy. We have seen it with Cactus and C1, C4 Picasso and C4 Grand Picasso - all very strong in their segments. We need to replicate that and we believe we will with the C3. If people want to buy a car, are attracted to the product, it makes transacting easier to do."