France gets its mojo back in car sales

The automobile market in France has degrown in the last 10 years except in 2009. Nearly 2.1 million passenger cars were sold in 2005 compared to 1.9 million a decade later.

The world sympathised with France when Bastille Day celebrations on July 14 were marred by a terror attack. While these were difficult times, car sales dipped in August with people off for their annual vacations. September saw a slowdown in growth with numbers up only 2.5 per cent over the previous year. The nine-month car sales chart in 2016 showed total sales of 1.5 million units, an increase of 5.7 per cent.

By end-September, the mood was more positive. At the Paris Motor Show, where the theme centered around mobility, French carmakers such as PSA and Renault showcased new models while their CEOs spoke of the road ahead. On display were also hybrid and electric vehicles, which were in line with the Environment Minister’s intent to provide a million electric charging stations across the country. Renault’s fully electric concept car, Trezor, grabbed the eyeballs at the show and gave a glimpse of future design and technology. Likewise, the company’s Zoe, Scenic, Koleos and Alaskan added to the glam quotient.

Not too far away, the Citroen pavilion had the new C3 while the new Peugeot 3008, now an adventurously-styled crossover, and the seven-seater 5008 had crowds queuing up. On the luxury front, a DS5 displayed its customisation possibilities.

PSA and Renault hold 53.5 per cent of the market for new passenger cars as well as the top 10 bestsellers. The Renault Clio IV is right on top with 80,785 units sold from January to September (up 5.4 per cent).

In the nine months to September 2016, the client segments showing the most growth over the preceding year were long and short-term rentals, at 14.1 per cent and 12.9 per cent respectively. The Environment Minister proposes to include the level of nitrogen oxide emissions while calculating the scrappage penalty for cars. Today, this only takes into account CO2 emissions.

The share of diesel in new passenger car purchases is still declining, although very slowly, and is now 52.5 per cent while petrol has increased to 43.6 per cent from 37.8 per cent. Alternative powertrains remain a very small percentage of the market though but electric vehicles are gaining ground, up to 1.1 per cent during Jan-Sept 2016 from 0.8 per cent in the preceding year. Autonomous vehicles are some years away even while the French government is framing regulations for their use.

Consumer confidence in France has rebounded from its low levels of July and spending remains close to its highest level since the financial crisis. The government’s €1billion tax-relief in 2017 for the middle class may boost car sales. GDP in France is forecast at 1.3 per cent for 2016 and PwC Autofacts anticipates 2.02 million new car registrations, an annual growth of 5.3 per cent.

From India’s point of view, French interest began with PSA way back in the early 1990s when the country had thrown open its gates to multinational car companies. Yet, Peugeot could not quite cope with the challenges of labour strikes and a liquidity crisis which prompted an abrupt closure of operations in end-1997.

Today, the company is keen on making a comeback to India after two earlier attempts. The first was attempting an alliance with Tata Motors to produce the 307 way back in 2001 while the more recent endeavour was in setting up a plant in Gujarat. This time around, PSA is keen on making an announcement in 2018 and it will be interesting to see if this includes its Chinese ally, Dongfeng Motor.

Renault, on the other hand, has been far more aggressive after its first failure with the Logan that was part of a joint venture with Mahindra & Mahindra. The lessons on localisation have been learnt and today it has a sprawling plant in Chennai with global partner, Nissan.

Renault has also hit the bull’s-eye with its Kwid compact car that has set the sales charts on fire. It has emerged a strong rival to the Maruti Alto and its success will give the company more confidence in planning a product blitzkrieg for India.

The writer is Partner, Price Waterhouse

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