PSA's upscale DS brand says it has secure future within merged group

FILE PHOTO: The logos of car manufacturers Fiat and Peugeot are seen in front of dealerships of the companies in Saint-Nazaire, France, November 8, 2019. REUTERS/Stephane Mahe

PARIS (Reuters) - The 2019 sales performance of Peugot SA's PEUP.PA upscale DS brand shows it deserves to have a future within the merged PSA, Fiat Chrysler group, the brand's CEO said.

PSA and Fiat Chrysler struck a $50 billion deal in December to create the world’s No.4 carmaker, to cope better with market turmoil and the cost of making less-polluting vehicles. The deal is expected to be finalised in early 2021.

The combined business will have 14 brands with Peugeot, Citroen, Opel and Fiat among those competing in the mass market segments and notably Alfa Romeo and DS in the premium sectors.

“The future of a brand hinges on its credibility and success. If one looks at what DS did in 2019, obviously the future of DS is not an issue,” DS CEO Beatrice Foucher, who took up the role at the start of the year, told Reuters.

DS focuses on SUVs and a premium sedan and aims to compete with Mercedes and BMW.

While PSA boss Carlos Tavares has said that there were no immediate plans to change anything in the large portfolio of brands within the combined group, analysts wonder if DS, which is newer than Alfa Romeo to premium, will be able to co-exist with the Italian brand.

After five consecutive years of decline, DS eked out a 0.8% gain in sales in 2018, accelerating to 17.5% growth in 2019. However, sales volumes of 62,500 last year were far below their peak in 2012.

Last year, Alfa Romeo had sales volumes of around 85,000 vehicles, according to an industry source.

With its SUV DS7 and DS3 Crossbacks produced in France and its DS9 flagship sedan made in China, DS plays the card of “French-style luxury” to compete with German models that dominate the sector. It relies on Europe for 90% of its sales and will have 450 dealerships by end-2020.

Reporting by Gilles Guillaume, Writing by Dominique Vidalon; Editing by Elaine Hardcastle