Group PSA, headquartered in the outskirts of Paris, France is the second largest European-based auto-manufacturer in the world. Its brands include Peugeot, Citroën, DS, Opel, and Vauxhall (the last two brands it acquired from GM in 2017). Despite having a large international presence, PSA is completely absent from the U.S. market (the second largest automobile market in the world). In contrast, PSA’s main competitors in Europe—Germany’s Volkswagen, France’s Renault (through its ownership of Nissan) and Italy’s Fiat (through its ownership of Chrysler)—have large presences in the U.S.

In response the CEO of PSA, Carlos Tavares, is plotting a comeback to the U.S. by 2026—it left the U.S. market in the 1980s. To implement this comeback, PSA has already started engineering its future models to meet U.S. safety and emissions rules. The company chose its Peugeot brand for the comeback, saying it had most recognition among Americans. In addition, PSA has opened its U.S. headquarters in Atlanta with a core team to build its U.S. strategy and steer its execution. However, entering the U.S. presents several challenges for PSA as that market is “exceptionally competitive” for compact vehicles where the company has traditional strength (although it now produces Europe’s most popular SUV, the Peugeot 3008). In addition, after it left the U.S. it lost all its distribution network in the country. To that end, Evercore ISI analyst Arndt Ellinghorst suggests: “I would recommend PSA to tackle this with a partner rather than trying to establish a hardly known, new brand in the U.S.”

Questions

1. What can PSA gain by entering the U.S. market? Do you agree with Arndt Ellinghorst on bringing in a partner to distribute the brand? If so which partner would be more logical? A European competitor with operations in the U.S. or an American company?

2.
Would acquiring an auto manufacturer with a U.S. presence be a better solution? If so which one?