Peugeot maker weathers auto industry slump in Q3

Bloomberg

The maker of Peugeot cars weathered a slump in the auto industry in the third quarter, helped by demand for popular models like the Peugeot 508 and Citroen C5 Aircross.
PSA Group’s revenue grew 1% from a year earlier, the French company said on Wednesday, just ahead of the average estimate of analysts. Automotive revenue was stable.
The carmaker, led by Chief Executive Officer Carlos Tavares, has managed to avoid the worst of the slowdown gripping the industry by introducing revamped models and riding the wave of demand for SUVs. It’s also stuck to what Chief Financial Officer Philippe de Rovira has called a “strict” pricing policy, with fewer discounts, helping PSA lift revenue even as unit sales decline.
“In Europe, the momentum of the group is strong — we’ve gained market share,” de Rovira told analysts on a conference call on Wednesday. Still, “PSA is continuing to face challenges in emerging markets, especially in China.”
The performance wasn’t enough to lift the shares, which slipped 0.3% to 23.96 euros by 9:08 am in Paris trading. The stock has advanced 28% this year.
In Europe, where Peugeot does the bulk of its sales, volume at PSA Group brands has been flat through the first nine months of the year, compared with drops at French rival Renault SA and Volkswagen AG, the world’s biggest carmaker, according to data from the European Automobile Manufacturers Association. Overall, the European market has declined by 1.6%.
Renault slashed its targets for the year, citing deteriorating results in markets including Turkey and Argentina and spending on research and development.
Daimler AG has cut its forecast twice this year, while car-parts maker Continental AG announced 2.5 billion euros in writedowns.
PSA on Wednesday kept its mid-term target of generating an automotive recurring operating margin above 4.5% on average for 2019-2021. The margin reached 8.7% in the first half of the year.
PSA wasn’t immune to the weaker market, with total vehicle sales dropping to 2.58 million units in the first nine months of the year from 2.88 million a year earlier. The company cut its market outlook for Russia on Wednesday, and now predicts a decline this year.
The slowdown comes at a time when the industry is facing fierce competition from new entrants like Tesla Inc and a costly transformation to electric and self-driving cars.
Tougher emission rules have also emphasized the need to invest in cleaner technologies, potentially by pooling resources with other manufacturers. Fiat Chrysler Automobiles NV, which struck a deal with Tesla to reduce its average emissions in Europe and thus avoid fines, ended talks to combine with Renault earlier this year.
The companies are also battling slowing economies in Europe, where the biggest market, Germany, is at risk of sliding into a recession and UK buyers are awaiting the outcome of Brexit.
More than three-quarters of PSA’s sales are generated in Europe, a reliance that became more acute since it acquired the Opel and Vauxhall brands from General Motors Co.