Peugeot’s Opel/Vauxhall Purchase Might Not Be a Great Idea
One of the biggest automotive deals that took place in the year 2017 has been between General Motors and Peugeot. It is quite a well-known fact that the American automotive giant has been struggling to run in the European market. After a fair bit of struggle, GM made the difficult yet wise decision of dropping out from the European market and focus its resources where they offer a good return on investment.
General Motors sold Opel and Vauxhall to the infamous French automotive group—The PSA Group.
The Challenge
GM is among the topmost car manufacturers around the globe, and if it failed to enjoy good returns in the European market, it is a sign that surviving here is not that easy. GM’s American rival Ford would agree as it literally had to take the most drastic measures possible in order to survive in the European market.
This is a major challenge for the PSA Group. The signs can be seen with the downgrading of Peugeot’s stock which fell to €11.20 each—a staggering approximately 50% fall. Berenberg’s Alexander Haissi said in statement,
“For Peugeot (PSA), the perceived value of the Opel/Vauxhall deal overlooks crucial obstacles beyond pure execution risk,”
The Disadvantage
To add to the unfortunate events, automotive markets in the Germany and the UK are moving towards the trend of leasing. In fact, three-fourths of the total transactions in the UK are comprised of leasing trends which is not a good sign for both Opel as well as Vauxhall. According to Alexander Haissi,
“Highly uncompetitive residual values in markets that are dominated by leasings – such as the UK and Germany – have led to continued market share declines,”
In other words, this trend is not bringing many benefits to Peugeot (PSA). This is because if it comes to leasing, consumers are likely to go for the high-end vehicles that cost cheaper over a lease as opposed to getting a Vauxhall for a higher price.
To make matter worse, Opel and Vauxhall tend to lose value far quicker than their competition. This causes a massive reduction in the resale prices of these cars; while for other alternatives, the resale values remain higher due to lesser depreciation.
What Might Happen?
According to analysts at Berenberg, a lot of factors can contribute to the potential downfall of the Vauxhall brand. These include a not-so-good engine and weak pricing for the brand.
It is things like these that have raised a lot of questions among the analysts and concerns among the beneficiaries of Opel and Vauxhall. On the other hand, taking in view PSA Group’s success in Europe, you can expect the French automaker to rise with a great counter. Let time be the judge of that.
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