Peugeot Says It Never Cheated on Emissions as Car Sales Riseby
Third-quarter revenue rises 3.2% as European market expands
Peugeot reiterates automotive operating margin target for 2018
PSA Peugeot Citroen said it has never duped consumers about its diesel vehicles, taking a swipe at Volkswagen AG as the German rival reels in the aftermath of a cheating scandal.
Peugeot promised new measures to make its vehicles cleaner and said it will also soon publish real-world fuel economy figures vetted by an independent body. The French carmaker, Europe’s second-biggest, said it has never fitted vehicles with software to turn on emissions controls only while being tested, as Volkswagen has admitted to doing.
"We know that we have a favorable positioning, and we want to exploit this favorable positioning by letting people know about it,” Chief Financial Officer Jean-Baptiste de Chatillon said on a conference call with reporters Monday.
Peugeot relies on diesel, especially in its home market of Europe. The engine type accounted for about 60 percent of its European sales in the first half of this year, and 42 percent worldwide. The Paris-based automaker said Monday that third-quarter revenue grew 3.2 percent to 12.4 billion euros ($13.7 billion) as both deliveries and pricing in the region improved. Even so, Peugeot’s worldwide vehicle sales fell 4.3 percent in the period, pushed down in part by a drop in China.
Peugeot fell as much as 2.7 percent and was trading down 1.9 percent at 15.93 euros as of 11:50 a.m. in Paris in the stock’s first decline since Oct. 16. That pared the shares’ gain this year to 56 percent.
“The reality is that this car company is not growing,” Max Warburton, a Singapore-based analyst at Sanford C. Bernstein Ltd. with an outperform recommendation on Peugeot stock, said in a report to clients. “Can car companies without growth really thrive?”
Nine-month deliveries fell 1 percent from a year earlier to 2.16 million vehicles. Third-quarter sales dropped 17 percent in China and Southeast Asia and 23 percent in Latin America, while increasing 6.1 percent in Europe. The French carmaker raised its full-year European auto-market growth forecast to 8 percent from 6 percent, and stuck to mid-term targets, including an operating margin of 2 percent of revenue in 2018 for its automotive division.
“Despite a more difficult economic environment in the third quarter,” Peugeot has confidence it will reach targets, de Chatillon said.
Peugeot, which has teamed up with Chinese carmaker Dongfeng Motor Corp. to expand sales outside Europe, posted its first annual operating profit in three years in 2014 after shutting a plant, cutting jobs and freezing pay. Chief Executive Officer Carlos Tavares laid out a strategy last year, dubbed Back in the Race, that involves restructuring South American and Russian operations and streamlining the group’s product offerings while adding new models at its new DS premium brand.
Diesel models’ share of the European car market has already been eroding, and industry consultant LMC Automotive estimated last month that the Volkswagen emissions-test cheating scandal could cause a further drop.
An acceleration of car buyers switching to gasoline-powered vehicles in Europe, particularly in France, may represent a risk to Peugeot’s margins, as diesel models generate more profits, de Chatillon said. Even so, the company plans to cope with this risk by progressively adapting its pricing policy, and “it will remain a clear advantage for our clients to use a diesel car” because of lower fuel consumption and reduced carbon emissions from the vehicles, he said.