Motor industry at crossroads
• Executives see new technologies changing the game more than mergers such as PSA’s purchase of Opel
The motor industry is facing seismic changes with the rise of electric vehicles, automated driving and car sharing set to eclipse even big mergers such as PSA’s purchase of Opel as a focus of attention, executives at the Geneva auto show said.
Peugeot maker PSA Group said on Monday it would buy loss-making Opel from General Motors (GM), creating Europe’s biggest car maker after Volkswagen (VW) and sparking speculation of more consolidation.
However, some industry executives said the deal was unlikely to alter the landscape, with changing consumer habits and new rivals in Silicon Valley and China likely to have a much bigger effect on car makers.
“My feeling is that the industry as a whole and brand positioning will change in the next 10 or 15 years, and that comes in addition to traditional consolidation,” said Herbert Diess, the head of VW’s passenger car division.
“We are really in a transitionary phase for the industry. There are new competitors on the horizon like Tesla or Chinese ventures,” Diess said, adding that he did not expect a wave of Opel-style mergers.
VW is investing billions of euros in electric vehicles, automated driving and new mobility services, in part as it tries to recover from a costly emissions test cheating scandal that has hit demand for its diesel vehicles.
The company is unveiling a fully self-driving concept car at the Geneva show.
Karl Schlicht, the head of European sales at Toyota, also played down the effect of the PSA-Opel deal, which brings together car makers with a heavy focus on diesel and lowmargin fleet vehicles.
“We ran a counter strategy in Europe which may not look as successful for some past years because our volumes were a bit lower, but in terms of where we want to end up, it’s turning out to be a good strategy,” he said, referring to Toyota’s investment in hybrid vehicles.
Toyota forecasts its European sales will rise 5% this year, while the market is expected to grow 1% amid uncertainty over German and French elections and Britain’s departure from the EU.
BMW boss Harald Krueger, however, said the cost of investments in new technologies could spur deals among smaller car makers.
PRICING STRATEGIES
Some industry analysts also say an enlarged PSA could actually ease the pressure on rivals if CEO Carlos Tavares uses similar methods to turn a profit at Opel that worked at PSA.
In the three years since Tavares took the helm at PSA, its brands — Peugeot, Citroën and DS — have significantly increased pricing relative to benchmarked rivals, sometimes at the expense of sales.
A similar approach at Opel, which has been an aggressive discounter, could give the entire European mass-market car industry some breathing space.
“The deal could then ease price pressures, lead to a stabilisation, or even a recovery,” said Michele Pedroni, a fund manager at SYZ Asset Management.
GM and PSA have shared production of commercial vans and developed common vehicle platforms for years.
Stefan Bratzel of the Centre of Automotive Management in Germany said the potential improvement in profitability at PSA-Opel posed a bigger challenge to rivals than its size.
“There is no survival of the fattest. Just because you’re big, you do not win the game.”
Some analysts say Fiat Chrysler, which has less than 7% of the European market compared with PSA-Opel’s more than 16%, could be among the most pressured, with its high debts and costly plants in Italy.
“Being a mid-sized player in Europe and not particularly profitable in the region leaves them quite vulnerable,” said Felipe Munoz, an automotive analyst at JATO. “They are too expensive to be bought by one of the big guys, and they are not in a position to grow unless they find a partner.”
Fiat Chrysler boss Sergio Marchionne has long advocated mergers to share the cost of cleaner and smarter cars, but his attempt to woo GM was rebuffed.
Marchionne said on Tuesday that Fiat Chrysler did not need a merger, but that he would not rule one out.
Ford, another mid-sized player in Europe, highlighted the importance of limiting costs.
European boss Jim Farley said it was “really, really important” for the future of its more than 14,000 UK workers that the country strikes a tariff-free trade deal with the EU.