PSA and FCA - a distribution perspective
We do not normally comment on specific companies in the industry, particularly where that includes subscribers to our research, but a number of people have asked about our views on the PSA-FCA merger, so it seems appropriate to share those more widely. We have no inside knowledge, so these thoughts are based purely on public information.
We see the deal as a positive from a customer and dealer perspective in Europe. There are risks if the US market turns down because FCA is in reality an Americas company, and Tavares needs the profits to keep flowing from the US and from existing PSA Group operations in Europe to fund the turnaround. It also doesn’t solve the challenges they both have in Asia, but that’s maybe for tomorrow.
For some years, FCA has promised a lot with Fiat, Alfa and Maserati but not had the funds to deliver the promised products. Dealers have invested on the back of these promises and only had some upside from Jeep. Given how quickly Tavares led the turnaround in Opel/Vauxhall with the first new products coming to market already, we should be looking at genuinely new Fiat product in a similar timeframe. They need to do this to meet emissions targets without continuing to rely on the former FCA strategy of buying Tesla credits. Given that PSA brings a full product line-up to the table, I would not assume that Fiat’s previous plans of focusing on 500 will survive – that was the only response they had when there was no money in the kitty and stretched product development resources. Maintaining individual brand identities across the enlarged portfolio will become a greater challenge with the FCA additions, so that intra-group competition is minimised.
Given the lack of product overlap it might take longer to bring new Alfa and Maserati product to market, but refinement of what is already in place would make a big difference – recent launches such as Guilia, Stelvio, Ghibli and Levante have all been compromised by inadequate product development processes that have yielded flawed products. A relatively modest additional investment could make a big difference. With Tavares on board as the biggest petrolhead in the business, I think we can look forward to some great products from these brands in a few years.
We can also expect a return to more orderly supply for FCA products, following the pattern applied to Opel/Vauxhall, so the stress on the dealer network from excess inventory, pre-registrations and too much supply into daily rental and other similar channels should reduce. The downside for dealers is that whilst we would not expect multibrand dealerships bringing the FCA brands together with the PSA brands (including Opel/Vauxhall) under one roof, there will almost certainly be some consolidation of investors. The strongest dealer investors, most often PSA outside Italy, will be expected to take on territories which currently have weaker investors, and existing PSA initiatives in the parts sector will be extended into the FCA brands. Inevitably this will bring winners and losers, but the resulting dealer body should be stronger. We can also anticipate that there will be changes at the national sales company/importer level, much as happened with Opel/Vauxhall, but brand separation will be maintained at the working level.
Some of the background investments such as branded online channels, which will play a bigger role in an omni-channel world in the coming years, are also likely to be shared across brands, even if the consumer interface will remain unique for each brand. Greater scale means that this is likely to be offered faster than would otherwise be the case, even if the real volume of online sales (meaning a financial commitment, not a lead) will be constrained by the appetite of consumers to finalise sales in this way.
Whether the industry needs another stronger competitor is a separate question, but Tavares is a big believer in the Darwinian principles of “survival of the fittest” so he is understandably fighting his corner. It is up to the other players to respond.