Renault, Peugeot sales witness downfall in Europe, approaching other potential areas

PSA Peugeot Citroen and Renault, both the French multinational automakers, again registered a downfall in their quarterly sales since the car makers put great effort in generating demand in declining auto market of Europe. Peugeot, the second largest auto maker in Europe, witnessed a downfall of 7 per cent in its first quarterly sales (January to March). On the other hand, the quarterly sales of Renault slumped by 8.6 per cent. Both of these auto giants are going from a weak assessment as compared to the corresponding period last year, wherein the buyers were motivated to exchange their old cars with new brands introduced in the market.

Parallel to Italian car maker Fiat, which presented reports on 26th April 2012, both the car makers are witnessing a bad time because of their confidence on the declining auto markets of France, Italy and Spain. Renault commented that its domestic market faced a downfall of 19.4 per cent during the first quarter.

In the previous year, all the big players apart from Volkswagen registered downfall in the European auto market. In contrast, Peugeot and Renault who were not engaged in offering their cars in the auto market of US reported a growth in their first quarter sales, pitching four-year high. On the other hand, the auto markets of India and China also witnessed a decent pace of growth rate.

Both the auto giants, Peugeot and Renault who were trying to compensate their European conditions targeted the growing auto markets of Latin America and Asia, which have no scope of development till the end of second half. However, Peugeot is attempting to reduce its reliance on the European market, which it considers a lethargic place to trade. In addition, the company is concentrating over its operations in China and a venture with General Motors, the auto giant based in United States. These plans of the company are focussed to reduce its annual expenditure of $2 billion. As compared to Renault, which generates 46 per cent of its sales outside Europe, Peugeot produces 42 per cent sales away from the continent.

The shares of Peugeot marked a rise of 4.6 per cent as revenue, standing at 14.3 billion euros, which outpaced the prediction of analysts. In addition, the company attained near to its €1.5 billion asset disposal plan during the first quarter itself. The company said that its net debt should substantially reduce during the current year, in spite of negative flow of operational free cash before one time items.

Kristina Church, Capital Analyst, Barclays, said, “PSA sales are not worse than expected, but there are still a lot of uncertainties ahead. They said the free cash flow figure is going to be bad, but how bad is the question.”

On the other hand, Renault, the partner in Joint Venture (JV) with Japan based Nissan Motor, is working on its complete year aim of recording a positive flow of automotive operational free cash. This situation was observed when the company registered €9.5 billions of quarterly sales subsequent to when the market closed.

Jerome Stoll, Sales Director, Renault said that the company believed to register slight growth in its sales during the second half, whereas the first half sales throughout the world is expected to go flat as compared to corresponding period of last year. He further added that the manufacturer of Clio compact cars and Dacia Duster SUVs, which are incorporated with only basic features, are aiming a growth of 3 to 4 per cent. The shares of Renault marked an increase of 2.1 per cent when market closed.