PSA Sees No Turnaround in Chinese Sales Soon Amid Dealer Woes

  • French company seeks to improve sales and marketing skills
  • Carmaker raises car market forecasts for Europe, Latin America

PSA Group is unlikely to revive its car sales soon in China, the world’s largest automotive market, until the automaker can improve staffing at dealerships, Chief Financial Officer Jean-Baptiste de Chatillon said.

“We need to address and fix some human resources aspects of the question” following a 46 percent plunge in the French manufacturer’s first-quarter deliveries in China and Southeast Asia, de Chatillon told analysts Wednesday on a conference call. “Sales and marketing skills are the main issue,” and the company must “reconstruct relationships with dealers.”

The Paris-based maker of Peugeot, Citroen and DS cars operates in China through manufacturing joint ventures with local partners Dongfeng Motor Corp., one of PSA’s main investors, and Chongqing Changan Automobile. It’s adding sport utility vehicles in an effort to revive flagging demand as customers shift from sedans. The drop in its Chinese sales, along with unchanged sales in Europe, held back PSA’s worldwide delivery growth to 4.2 percent in the first quarter.

“Performance over the first quarter is not so impressive as it does not imply real market share gain, despite sales recovery in Iran,” while the delivery plunge in China was “quite alarming,” Xavier Caroen, an analyst at Bryan Garnier & Co., wrote in a report.

PSA shares fell 1.5 percent to 18.66 euros as of 10:30 a.m. in Paris. That narrowed the stock’s gain this year to 20 percent, valuing the carmaker at 16.4 billion euros ($18 billion).

First-quarter revenue rose 4.9 percent to 13.6 billion euros, including a 2.5 percent gain at the automotive unit and a 9.4 percent jump at the Faurecia parts division, the Paris-based manufacturer said Wednesday in a statement. PSA reiterated a target for automotive operating profit to average more than 4.5 percent of revenue in the 2016-2018 period, and said it expects European and Latin American car markets to grow this year, rather than remaining stable.

PSA has been losing market share in Europe after scaling back discounts to shore up profitability. The French company is buying General Motors Co.’s Opel and Vauxhall brands to gain scale in the region as well as to pool resources for developing battery-powered models. In an effort to reduce dependence on its home market, PSA has returned to Iran and reached an accord in January to build cars in India, in addition to its operations in China.

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