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Autos

Peugeot pledges sales drive in new mid-term plan

PARIS (Reuters) - French carmaker PSA Peugeot Citroen outlined plans for international expansion and a push into after-sales services, seeking to convince investors it can follow a lightning turnaround with sustained improvements in profitability.

The Peugeot logo is seen on a car displayed at the headquarters of French carmaker PSA Peugeot Citroen in Paris, France, February 24, 2016. REUTERS/Charles Platiau

Paris-based Peugeot is targeting a 10 percent increase in sales by 2018 and a further 15 percent by 2021, as it expands in Latin America and the Middle East while adding production in India and Southeast Asia, Chief Executive Carlos Tavares said on Tuesday.

In what he described as a “global product and technology offensive”, Tavares outlined plans to reach more customers through after-sales offerings, car-sharing, used car sales and a multi-brand leasing operation tasked with achieving 100 million euros ($113 million) in profit by 2021.

However, market reaction was distinctly cool. Peugeot shares were down 7 percent at 13.63 euros as of 0900 GMT, outpacing the broader sector’s 3.7 percent decline as weak German economic data hurt sentiment.

“We don’t believe the plan will have PSA investors ecstatic,” Evercore ISI analyst Arndt Ellinghorst said, adding that many were expecting higher profit margins than Peugeot pledged to deliver. “We don’t see much room for upgrades.”

Peugeot will also take its first steps toward an eventual return to the North American market by launching a car-sharing service there in 2017, Tavares said. A partnership with Paris electric car-sharing operator Bollore is under consideration.

The so-called “Push to Pass” plan unveiled on Tuesday builds on a two-year recovery that brought the company back from near-bankruptcy to its highest profitability in 14 years, with the help of a government-led bailout.

NEXT YEAR’S MODEL

Peugeot’s operating margin surged to 5 percent last year, a target Tavares had initially set for 2019 onwards. On Tuesday he unveiled a more conservative goal of 4 percent for the next three years, rising to 6 percent by 2021.

Tavares aims to step up model launches, introducing a new vehicle each year for the Peugeot, Citroen and DS brands, including 11 new hybrids and all-electric cars.

The company also plans production in Southeast Asia and is seeking a manufacturing partner in India, he said.

Major carmakers have been taking tentative steps into areas such as car-sharing and ride-sharing, as the industry reacts to the growth of technology-enabled services such as Uber.

“The operative word here is the enlargement of our customer base,” Peugeot’s Chief Financial Officer Jean-Baptiste de Chatillon said.

Despite its improving fortunes -- and the planned resumption of dividend payments in 2017 -- Peugeot vowed that it would not let up on the cost-cutting that drove its turnaround.

After cutting 211 euros in costs per vehicle last year, Peugeot raised the savings goal to 700 euros per vehicle from 500 euros.

A prolonged European sales slump left Peugeot in need of a 3 billion euro rescue that saw the French government and China’s Dongfeng Motor Group Co Ltd take 14 percent stakes in the carmaker in 2014.

Tavares took over from outgoing CEO Philippe Varin the same year and made immediate headway through tighter control of working capital, particularly excess inventories of materials, parts and unsold vehicles.

Reporting by Laurence Frost and Gilles Guillaume; Editing by James Regan and Christopher Cushing

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