Business World

Friday 28 April 2017

Tech trends not takeovers worry car makers, despite Opel deal

Agnieszka Flak and Andreas Cremer

THE managing director of British car brand Vauxhall, which is being bought by Peugeot from General Motors, has said its British production sites are key to the brand's heritage and sales.

Cars sold here and in the rest of the Europe as Opels trade under the Vauxhall brand in the UK, something the takeover by PSA could cast into doubt.

"A key part of the brand heritage is that there is UK manufacturing," Rory Harvey told reporters at the Geneva auto show.

Peugeot-maker PSA has agreed to buy GM's European division, prompting concerns about the future of the British brand's car and van plants.

In Ireland, Opel and PSA's Peugeot and Citroen brands trail mid-market rivals like the top selling Toyota, relative new comer Hyundai and Volkswagen.

PSA Group said on Monday it had agreed to buy loss-making Opel from General Motors, creating Europe's second-biggest carmaker behind Volkswagen and sparking speculation over further consolidation.

However, in a sector facing seismic changes including the rise of electric vehicles, automated driving and car-sharing, executives at the Geneva auto show said such trends eclipse even big mergers, like the PSA deal.

Some executives at the event in Geneva said the deal was unlikely to alter the landscape on its own, with changing consumer habits and new rivals in Silicon Valley and China all likely to have a much bigger impact on carmakers.

"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, head of Volkswagen'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," Mr Diess told reporters, adding that he did not expect a wave of Opel-style mergers.

Volkswagen is investing billions of euro 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 diesel vehicles.

Karl Schlicht, head of European sales at Japan's Toyota, also played down the impact of the PSA-Opel deal, which brings together carmakers with a heavy focus on diesel and low-margin 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 5pc this year while the market is expected to grow just 1pc.

BMW boss Harald Krueger, however, said the cost of investments in new technologies could spur deals among smaller carmakers.

Some industry analysts also say an enlarged PSA could actually ease the pressure on rivals if ceo Carlos Tavares can turn a profit at Opel with tactics that worked at PSA.

In the three years since he took the helm at PSA, its existing brands - Peugeot, Citroen and DS - have significantly increased pricing relative to benchmarked rivals, sometimes at the expense of sales.

A similar approach at Opel, could give the entire European mass-market car industry some breathing space. (Reuters)

Irish Independent

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