Bloomberg reports that as French automaker Peugeot increases its presence in the Chinese market, it is having some difficulty standing out from the pack. A 34-year-old Buick Regal owner in Shanghai summed up the problem, “When I think German cars, I think reliable; when you mention American brands, it’s muscle cars and design. But French cars don’t have key selling points to me.”
Peugeot has stuck to the beaten path for most of its entrance strategies. The company opened its first flagship store, DS World, in Shanghai this March. The glittering glass façade on Nanjing Road encloses vintage models, hearkening to a long tradition of excellence, as well as black-and-white photographs of Chinese models posing with cars at the Louve for an added dash of chic.
Xue Zhitao, brand manager of Peugeot imports in Chengdu, said, “France is a romantic, fashionable place. When you mention France, you think of red wine and perfumes, so we use these at promotional activities.” But the upscale giveaways have not been enough to anchor the brand in China. The trifecta of German luxury car brands – Mercedes-Benz, Audi, and BMW – will sell 1.05 million vehicles in China this year. IHS Automotive forecasts that Peugeot will sell just 10,600.
“You need at least a decade to establish a new luxury brand in a market,” said Florent Couvreur, an analyst at CM-CIC Securities in Paris, “DS products are alright for Western markets but not adapted to the Chinese market.”
Part of the problem is that Chinese consumers want sedans, and Peugeot is offering them hatchbacks. The brand is opening a factory in Shenzen where DS5 wagons will be manufactured for the Chinese market and sold for 235,000 yuan (about $38,000) and up. The lower price is another flaw in the strategy. A young financial professional in Chengdu said, “If I were looking to upgrade my car, I’d rather get a Jaguar or Audi, not the Peugeot or DS brand. Peugeot to me is a mid-tier brand at best, definitely not high-end.”
Couvreur recommended that Peugeot sell shares to better establish it in the Chinese marketplace. There is talk that Dongfeng may buy a stake, but a Dongfeng official has said recently that his company is far from making a decision on that matter.
Until a more workable brand strategy is developed for China, Peugeot must rely on local manufacturing to boost sales; there is no market demand to justify high import taxes. By the end of the year, Peugeot will have four factories in China. Through introducing the DS line there, the brand hopes to raise its share of the marketplace to 5 percent from the current 3.8 within two years.
photo credit: peugeot china