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Peugeot Returns to U.S. to Help People Get Around, but Not With Its Cars

Category: Automobile,Finance

PARIS — Nearly three decades ago, Peugeot abandoned the United States market, stung by years of dwindling sales that were punctuated by a dispiriting 4,291 cars sold in 1990.

Two years ago, Peugeot’s parent, the big European carmaker PSA Group, announced its return to the cutthroat North American market. The move stunned some industry observers and amused several others with long memories.

Last month in Washington, the company finally unfurled its opening gambit, and it’s not a car, exactly. PSA is thinking smaller, rolling out an app, but also bigger: This is about the future of the car market as well as the company.

PSA’s North American plan starts with the new app, Free2Move, which offers users in Washington, D.C., the ability to book any kind of ride. The app includes services to rent cars, electric scooters and bicycles, as well as ride-sharing services — with no separate charges for parking, gas or insurance. Other United States markets are expected to follow.

The move is at once unconventional and yet fundamentally cautious for PSA, Europe’s longtime No. 2 carmaker after Volkswagen and the owner of the Peugeot, Citroën, DS, Opel and Vauxhall brands.

The company is aiming to become a total mobility provider, its chief executive of four years, Carlos Tavares, said in an interview last month at the Paris Auto Show.

“We believe that human beings are eager to protect their spontaneous freedom of movement,” Mr. Tavares said. “You need to have an available mobility tool that is going to fulfill this need for freedom to move anywhere, anytime, when you decide to do so.”

Signing up for Free2Move costs $10, and it can be used to book with scooter and bike services like Bird, Capital Bikeshare, Jump, Lime, Skip and Spin; the car-sharing service Car2Go as well as Free2Move’s own branded option; and Uber, the ride-hailing service. All billing is centralized via the Free2Move account.

The app, Mr. Tavares said, which got its start in Europe early last year, is a central element of PSA’s international business. PSA, once widely believed to be deeply troubled, has bounced back to profitability and growth under Mr. Tavares.

One year ago, PSA acquired General Motors’ Opel (Germany) and Vauxhall (Britain) divisions, which are already making a profit that eluded G.M. for decades.

With Free2Move, the company is placing a bet on deep changes to the car business in the decades ahead, as electrification, autonomy and car-sharing remake a capital-intensive industry known for being set in its ways.

Significantly, none of the 600 cars that Free2Move will maintain in the Washington test are PSA models. For now, app users choose between Cruze subcompacts and Equinox crossovers, both Chevrolets, while the Car2Go service found via the app offers Mercedes-Benz and Smart cars.

According to Mr. Tavares, at later stages in the company’s 10-year plan, Free2Move will include PSA’s own cars. Eventually, PSA will sell its cars in North America, under a brand that is expected to be announced this year. North American assembly is not out of the question, he said.

For now, said Mark Rechtin, editor of Motor Trend, using “other manufacturers’ cars is a low-cost market research tool to buy time and determine what vehicles and features will work best here.”

He added that this could be a way for PSA to sell off-the-rack “vehicles as a fleet to a company like Waymo or Uber — and not have to worry about selling to picky car shoppers and having a retail and service network.”

Any return to the North American market is noteworthy because it remains a diverse and expansive place, with great distances, unique sets of regulation and a hugely competitive environment. A combination of incentive spending and advertising costs has kept fledgling brands out of the market, while several established brands have fallen away of late.

Meanwhile, the stock market has shown mounting disdain for the major players’ prospects and shares, even in recent years of great sales and profit, as shareholders bridle at the thought of legacy costs, inefficient dealer networks and an uncertain regulatory future. Added to the list of worries lately are risks from a trade war and tariffs.

More significant still from a carmaker’s perspective may be the unknown chaos that car-sharing, autonomous driving and the switch to electric cars are likely to inject into the market and their own futures.

From its current position of relative good health, PSA is better placed than it had been to consider these pressures, and take its shot on the future. Yet, to the greatest extent possible, a company entering a major market would like to control its own narrative for as long as possible. With its new strategy, PSA aims to stake itself not just weeks or months to fail or succeed, but years.

“Because we don’t want to rush,” Mr. Tavares explained. “We want to start by making sure that our teams understand the U.S. consumer. I worked a few years in the U.S. in my former life.” (He was No. 2 at Nissan under the chief executive Carlos Ghosn, with whom he had a spectacular falling-out after admitting in an interview with Bloomberg that he wouldn’t mind taking on the challenge of reviving G.M., which was soon to be leaderless.)

Mr. Tavares continued: “I know that the customer expectations are very specific and the way you handle those expectations is very specific. So we decided that we would start by understanding the U.S. consumer through the mobility services activities that we are now implementing. It is a good way to understand the market.”

Larry Dominique, head of PSA’s start-up operation for North America, based in Atlanta, is charged with helping to develop and enact the strategy. He said he was certain that baby steps were the right way to go.

“The biggest mistake most companies make is overinvestment, and then the moment there’s an initial downturn, their fixed costs are way beyond their revenue and they’re in deep, deep trouble,” Mr. Dominique said. “We want to avoid that. And how do you avoid that? By planning well and making sure you understand very, very well the trends, the consumers, the behaviors, their wants and desires.”

He continued: “How is mobility as a service saving car-ownership patterns? What are we seeing geographically? How are alternative powertrains manifesting themselves in North America versus other parts of the world?”

Like a growing number of carmakers, PSA — with the founding Peugeot family, the Chinese carmaker Dongfeng and the French government each holding 14 percent of its shares — is proactively responding to the new markets.

A PSA news release announcing the Washington test program said: “In the U.S. alone there are almost 260 million vehicles, 320 million people and over 17 million new cars sold each year. Car manufacturing is not going away. However, just as Amazon and Uber have changed behavior, we believe PSA must also learn and participate in this emerging business.”

Rebecca Lindland, an industry marketing analyst at Kelley Blue Book, said the desire to read the market closely and forestall investment was understandable.

“The market is contracting, and the industry is changing so much,” she said. “I wouldn’t invest in a new dealership network and add rooftops at this time, especially since the euro is uncertain and Brexit hasn’t kicked in yet.”

Fortunately for PSA, the Peugeot, Citroen and Opel brands are long since clear from any obligation they had to any American dealers.

“Just to be very clear,” Mr. Dominique emphasized, “we have no legacy in North America. I have no dealer networks, I have no dealer contracts, I have no service contracts, I have no I.T. contracts. I literally have a green-field opportunity in North America.”

He added: “Trust me, I’ve had lots of calls from my friends and other O.E.M.s saying, ‘Larry, you have an opportunity that we can only dream of.’ They can’t tear down what they’ve already got.”


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