Dongfeng Peugeot Citroen Sales Stall On Brand Confusion

Following a series of management reshuffles and a slow start in the world's largest market, Dongfeng Peugeot-Citroen Automobile's sales in China barely made it past the half-way mark of their 2017 target, resulting in substantial losses for the joint venture carmaker.

Dongfeng Peugeot-Citroen saw a loss of 30 billion euros ($36.94 billion) last year, despite earning 242 million euros in 2016. Total revenue tumbled by 27.5 percent to 5.4 billion euros in 2017, down from 7.5 billion euros in 2016, according to Dongfeng Motor Group's announcement.

Only 377,547 locally made Peugeot and Citroen models were sold in 2017, 36.85 percent lower than the 597,873 vehicles sold in 2016.

The Hubei province-based automaker had set itself the goal of selling 700,000 vehicles in 2017 at the beginning of the year.

The French brands' failure in the Chinese market was a result of complicated power moves between the parties involved in the Sino-French joint ventures, according to automobile industry insiders who declined to be named.

An analyst told China Daily: "Given China's Dongfeng Motor is now one of the two largest shareholders of the French Groupe PSA, the Chinese party believes they deserve a stronger say in the venture.

"Meanwhile, there has been no consensus with the foreign group since Citroen was merged with Groupe PSA."

However, the 50-50 ratio in Dongfeng Peugeot-Citroen gives equal power to both parties.

At present, the joint venture has two parallel management teams that are responsible for the Peugeot and Citroen brands respectively.

Dongfeng Peugeot-Citroen experienced several management reshuffles in 2016 and 2017, which involved top executives from the Chinese and French parties, both brands' general managers, and their middle-management teams.

According to industry insiders, another conflict lies between Groupe PSA's now-favored Peugeot brand and the formerly stronger Citroen brands.

The original Dongfeng-Citroen team has made consolidated achievements in the local market, but in return faces weakened support, less favorable internal policies and fading brand exposure.

The company has been postponing Dongfeng-Citroen's latest SUV offerings appearance in the Chinese market, with Dongfeng-Peugeot instead being pushed in the popular segment, according to the analyst.

Unexpectedly, Dongfeng-Peugeot's 4008 and 5008 SUVs failed to take the Chinese market by storm, but Dongfeng-Citroen's C5 Aircross, which launched in September, won customers' hearts and became the driving force behind the company's sales rush late last year.

Local media reports identified the critical weakness as the mismatch between the company's governance and its dealership strength.

"Dongfeng-Peugeot's senior management seems to have done a better job than their peers at Dongfeng-Citroen. However, the majority of Dongfeng-Citroen dealers have rich experience and core competence compared to those with Dongfeng-Peugeot," said a Move Plus report published on its website.

Beijing-based Dongfeng-Peugeot split its teams in January and moved the branding departments to Dongfeng Peugeot-Citroen's headquarters in Wuhan of Hubei province, while the marketing team now shares Dongfeng-Citroen's Shanghai office.

"Some members of the Dongfeng-Peugeot management team in Beijing won't accept the relocation options, and might instead choose to leave the company. The brand's power could be diluted," said an analyst who declined to be named.

"It's a move to strengthen Citroen's brand influence and the well-established Citroen dealership network, as well as concentrating more power in the Chinese side of the joint venture."

The trigger behind this series of management changes are Peugeot's and Citroen's similar positioning in the Chinese market. Dongfeng Peugeot-Citroen has tried in the past several years to position Peugeot as a premium brand and Citroen as a value brand.

John Zeng, managing director at consultancy LMC Automotive Shanghai, told China Daily: "To boost Peugeot to a premium level, Citroen has to bear the sacrifice, since an economy brand should be priced 20 to 30 percent lower than a premium one to form a brand ladder."

haoyan@chinadaily.com.cn

(China Daily 03/12/2018 page18)

Source : http://www.chinadaily.com.cn/cndy/2018-03/12/content_35830364.htm

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