Peugeot sees an upturn in demand due to government help image

PSA Peugeot Citroen announced yesterday a 10% increase in its European car manufacturing as returning demand pushes the French carmaker a year into a turnaround plan for the brand that has been for a while now in troubled waters.

Peugeot stated that it would increase its car production by 60, 000 vehicles in the May-August quarter this year due to an improvement in the European registrations that might surpass the recovery goals set by CEO Carlos Tavares. The European auto market grew 10.8% in March compared to the same month in 2014 and gained in the mid-market brands department where Citroen and Peugeot are situated, surpassing the no-frills cars which did well during the economic downturn. With losses leading to a $3.2 billion bailout from the French government and China’s Dongfeng buying 14% in stakes, Peugeot promised under the leadership of its new CEO to return a 2% operating margin by 2018.

Peugeot is cutting labor costs and inventory with its new “Back in the Race” plan, focusing on more profitable cars and reducing model lineups. The French car market share only fell 0.5% in the first quarter of the year. Peugeot manufacturing chief, Denis Martin, said that “We were working with the hypothesis of a flat European market in 2015. If volumes are better, then of course it’s more favorable and may indeed allow us to hit our Back in the Race targets faster than expected.” Peugeot has seen an upturn in demand, with strong orders for models like the restyled 208 subcompact and the Citroen C4 Cactus. Big sales of delivery vans have also led to Peugeot adding a night shift at its Sevelnord plant in France.

By Gabriela Florea