13 May 2019

A week of tumultuous changes in the industry

The news this week that the Trump administration is to up tariffs on imports from China from 10% to 25%, rumours that Tata Motors has denied it is poised to sell Jaguar Land Rover (JLR) to the French owner of Peugeot and Vauxhall, along with PSA’s plans to build the Peugeot 308 in the UK and Germany alongside the Opel/Vauxhall Astra, have made it a memorable week and not all for the right reasons.

Starting with the US escalating its trade war with China, hiking tariffs on $200 billion of Chinese exports hours after trade talks held in Washington failed to produce a breakthrough; tariffs on the targeted exports increased from 10% to 25% on Friday, May 10, prompting a swift reaction from Beijing. While this may be just sabre-rattling from the Trump administration, the suddenness of the decision smacks of the immediacy of political changes made in China in the past; without democracy, there is no need to debate moves and the US is in danger of being viewed as non-democratic in this regard.

As to the mooted sale of JLR to PSA by its hitherto benevolent parents Tata Motors, this has to viewed in the model line-up, location and production facilities terms. PSA has had great success with its 3008 model but has a glaring hole in its product offering - the lack of credible SUVs. Buying JLR would solve this problem at a stroke and would be much better value than developing a range of heavier vehicles itself. The French carmaker would also gain JLR new facilities in Slovakia, a lower labour cost region where PSA has long wanted to make further inroads. Add to this JLR’s unrivalled 4WD technology and its new Wolverhampton, UK engine plant which is now coming on stream with new petrol engines, the deal does not look so fanciful.

PSA does need new production bases; in the last three years, it has closed plants in Europe and left itself a little light on capacity; its Sochaux plant is running at more than 100% utilisation and transferring 308 productions from Sochaux to Russelsheim and Ellesmere Port in the UK could ease pressure at the plant.

Combine this with Carlos Tavares’s intention to return to the US market - he could use the JLR dealer network as a springboard for PSA sales - and it all starts to make even more sense. So could we see a British icon, the Defender, built in Slovakia by a French company and marketed in the US? Don’t rule it out...


Simon Duval Smith

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