Opel’s new parent firm, PSA Group, has expressed interest in selling Opel vehicles outside of Europe. So where to expand to first if not China — the world’s biggest car market? Not so fast, according to Opel CEO Karl-Thomas Neumann, who recently shared skepticism on introducing Opel in China to reach profitability.
“The Chinese market is no longer the cure-all to help solve the problems on all the other markets,” Neumann told German publication Auto Motor und Sport. The executive added that instead of allocating resources to introduce Opel in Asian markets, his first priority is to make the carmaker profitable in Europe by leveraging the relationship with the PSA Group.
Under General Motors, Opel has not turned a profit in Europe for 16 years.
Early in the decade (and under GM ownership), Opel ventured into China by importing vehicles into the country, which subjected it to China’s high import tariffs. After selling less than 6,000 vehicles over the course of a year, GM phased out Opel in 2014 so as not to interfere with its Buick brand, which is highly successful in the Chinese market. Ironically, Buick sells some Opel vehicles as part of its own lineup in China, albeit under the Buick badge.
Earlier this month, General Motors announced that it has reached an agreement to sell Opel, along with its sister brand Vauxhall, to French automaker PSA Group for €2.2 billion ($2.3 billion USD), raising questions about Neumann’s future at the automaker. Shortly after, it was confirmed that Neumann will stay in his spot under PSA ownership.
“It is our intention to make sure Mr. Neumann continues the excellent work he has been doing”, stated PSA Group chief executive officer Carlos Tavares, Neumann’s new boss, at a press conference announcing the deal. “We trust that he will be in the best position to lead the turnaround and a profitable future for Opel.”
PSA has promised to operate Opel as a separate firm with distinct management while exploring opportunities to sell Opel cars beyond Europe.
Comments
JVs make China less profit rich than North America. Opel can rebadge the very best of the PSA line up for the abroad much like we see GM do with Holden, as an example.
It will be at least five years before PSA can flip cars like Astra to PSA architectures and it will be at about this point that Opel enters the US a a VW or even Mazda rival. GM should have done this instead of silly Saturn or as an Olds replacement.
Not only is China less profit rich because of the required JVs, but it’s also less profitable based on the lower margins.
I expect the first Opels on PSA platforms to arrive prior to 5 years from now…roughly 3 years or so (with the Corsa replacement being the first). Also, PSA’s strategy for North America doesn’t call for entering the market with its own cars for at least 10 years. To reference myself:
http://gmauthority.com/blog/2017/02/opel-suitor-psa-group-plots-strategic-return-to-north-america/
I remember reading the article; with the Opel buy, however, doesn’t this toss everything into a cocked hat?
PSA must expand Opel into a new market with Neumann dead set against China this really only leaves the US as a viable option given that Latin American margins are too thin plus the group is already operational in the region.
I’m very used to GM constantly upgrading platforms, and it seems that the current PSA architectures will be dated and heavy within 5 years. Opel must be pitch perfect when entering the US as the emotional VW taking on VW and the Asian brands. Until this it’s dealt with the issue of expansion is debatable.
(I still think that GM & PSA will ally within a few years like Renault Nissan. PSA will know every GM secret and GM holds PSA stock. Such a partnership would be exciting.)
I don’t think that the Opel acquisition changes PSA’s strategy much. Their current architectures would not meet U.S. regulations, so it will take at least a few years to engineer new ones that would underpin their new wave of vehicles (PSA brands + Opel and Vauxhall), while also ensuring that the platforms would meet U.S. regs.
I do, however, I agree that they will enter the U.S. at some point. The profit/top-line opportunity here is just too vast to miss… especially now that they have a brand like Opel.
PS: I really hope that a deep GM-PSA alliance will not take place. Or, if it does, it will result in PSA using GM’s architectures and technology, rather than the other way around 🙂
GM leads in all areas so PSA would probably want access to premier technology.
How long will GM lead? Quitting Europe means that The General can avoid the strict EU emissions and mpg requirements not mandated elsewhere.
Winning! Maybe not. Definitely not.
Automakers like Hyundai who do far less volume will make the required investment as opposed to quitting the Old World. This will give other automakers a MPG advantage, especially with three bangers, that will matter in developing markets like India and Brazil.
GM, for close to a decade, sold heavy cars with lower than optimum mileage. Let’s hope that GM does not become relient on PSA for technology down the road when internal combustion engines make a breakthrough as predicted by Mazda.
GM clearly wants to move past the internal combustion as a primary means of propulsion. Unfortunately, electric cars are still far from the guaranteed transportation mode if the future regardless of Elinon Musk and fuel cells are only now gaining public understanding.
Developing markets will lack the infrastructure needed for electric cars for many years and, in this case, Barra is practicing wishful thinking while pursuing short term gain.