PSA's industrial choices undermine French foreign trade in cars

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The 2020 foreign trade statistics are available and their analysis is edifying. It largely confirms the de-industrialisation and indicates that, coupled with the choices made by French manufacturers - and in particular by PSA for 2020 - the pandemic has led to a real collapse of French production. The drop in consumption has limited the size of the external deficit, which is nevertheless growing very seriously in terms of vehicles. Moreover, where political announcements suggested that electric or electrified vehicles could be an opportunity for the French site, the statistics cast doubt and indicate the extent to which politicians will have to be proactive in order to bring manufacturers to reverse old choices that were heavily unfavourable to the French site.
 
Well before the health crisis, the whole French car industry knew that the year 2020 would be catastrophic because of the acceleration of the phenomenon of the gap between the vehicles that French manufacturers decide to assemble in France and those that the French buy from them.
 
Thus, if we take the Top 10 of PC sales in France in 2020, we have 589,000 vehicles sold, i.e. 35% of the total.
All these vehicles are from brands belonging to French groups (1 Dacia, 4 Renault, 4 Peugeot, 1 Citroën) but only 3 are assembled in France: the Peugeot 3008, the Renault Zoé and the Peugeot 308.
In 2019, the picture was a little less bad because three models in this ranking were still, in 2019, partially or totally assembled in France: the Clio which Flins completely abandoned in favour of Novo Mesto in Slovenia and Bursa in Turkey, the 208 which Poissy had to watch leave entirely to Trnava and Kenitra (Morocco) and, above all, the 2008 (62,000 registrations in 2019 and 67,000 in 2020) which was 100% assembled in Mulhouse and which is now assembled in Vigo.
 
Since these three partial or total departures were announced and since we knew the volumes of Clio 4, 208 and 2008 assembled in France in 2019, we had a fairly precise idea of what the fall would be and in December 2019 Claude Cham, president of the Fiev predicted: "France will lose 400,000 vehicles in production in 2020 (compared to 2019)".
Volumes were indeed expected to plunge to 1.8-1.9 million units, i.e. to the lowest level ever reached, that of 2013 (1.74 million) or 2014 (1.82 million).
The Covid has obviously greatly accentuated the phenomenon and the fall in French light vehicle production is more in the order of one million (- 40% compared to 2019).
 
In fact, apart from the announced fall, demand for French sites has fallen more than the European markets because, in terms of passenger vehicles, the measures to support demand have tended to target small vehicles, assembled in the new Member States or in Morocco, rather than medium-sized vehicles assembled in France.
Thus, if we consider foreign trade, we see that the deficit for 2020 appears to have stabilised at the level reached in 2019: 15.4 billion euros.
 
The automobile has thus become the third largest deficit item in French foreign trade behind hydrocarbons (-27 billion), electronics-optics and IT (-18.7 billion) and ex-aequo with textiles-clothing.
It should be remembered that, until 2008, this foreign trade was in surplus, that it became in deficit during the financial crisis and that the deficit has tended to increase continuously since then. This is partly because, for a long time still in surplus, foreign trade in parts logically followed that of vehicles. As assembly is relocated, so is sourcing and if, at first, it is the French equipment factories which supply the new assembly sites, the movement ends up being reversed and it is finally the new equipment factories which supply the surviving French assembly sites.
Thus, in 2019, the automotive deficit was also 15.4 billion but 'automotive equipment' was responsible for 20% of this deficit (3.4 billion) and vehicles for 80%.
 
In 2020, the fact that production plunged by more than 40% made it possible to reduce imports of parts by 4.4 billion (-25%) and the deficit was reduced to 0.6 billion euros. 
If, overall, the deficit remained constant, it is because the deficit on vehicles increased significantly: it rose from 12 to 14.8 billion euros because exports fell more (-7.8 billion; -22%) than imports (-4.9; -10.4%). 
In volume terms, these deficits over the last two years have corresponded to 652,500 more vehicles being imported than exported in 2019 and 825,700 in 2020. 
The fall in exports by volume is 35% (480,000 fewer vehicles) and that of imports 15%. If there is not a similar fall in value (-25% and -8% respectively), this is because unit values are increasing: exported vehicles are rising from 13,750 to 15,850 euros (+15.2%) and imported vehicles from 15,466 to 16,707 (+8%); exports are becoming more expensive than imports.
This can be seen as a kind of illustration of the limits of PSA's typical 'move upmarket' strategy: certainly part of what is lost by importing all the B-segment vehicles bought by the French is recovered by the increase in price of vehicles exported from France. But, as can be seen in 2020, this is not enough to prevent the deficit from increasing because the volume dynamics are opposite: even if it is smaller, the increase in the price of B-segment products is significant and is all the more so because the more expensive B-segment SUVs (typically the 2008) are also imported. 
 
These trends are therefore hopelessly constant and their economic consequences are highly predictable. 
Aware of the problem and alerted once again by the profession and, in particular, by the employees, the equipment manufacturers and the territories concerned, the public authorities have this year given their support to the sector. On 26 May, President Emmanuel Macron wanted to give a perspective by indicating that this slope on which the French site has been dangerously sliding for almost 20 years could be climbed back up by making France a sort of "European champion" not only in the design but also in the production of clean vehicles ("electric and electrified"), i.e. the assembly of these on the one hand and the manufacture of their components (cells, batteries, turbines...) on the other. 
 
Since Renault assembles its European electric bestseller, the Zoe, in Flins and since Rennes, Mulhouse, Sochaux and Poissy seem to be well positioned in the industrial organisation of the production of PSA's clean vehicles (mainly rechargeable hybrids in the C segment), we would like to believe in this and it is therefore interesting to examine the 2020 foreign trade statistics and ask ourselves whether there are any early signs of this revival.
Alas, the figures here are cruel: of the 2.8 billion euro additional deficit in foreign trade in vehicles in 2020, over half (1.55) is due to electric and electrified vehicles. 
Indeed, in 2020, de-de-identification continued and allowed the external deficit in value on diesel vehicles to be reduced from 4.7 to 4.2 billion euros. This means that petrol and electrified vehicles have increased the deficit. 
In fact, in 2019, France imported 512,000 more petrol vehicles than it exported (1,266,000 against 754,000). In 2020, this deficit is 597,000 vehicles because the fall in imports (-246,000) is not sufficient to compensate for the fall in exports (-330,000; -44%). This results in an additional deficit of more than 1 billion.
This is in addition to the very unfavourable evolution that can be observed for each of the three categories of 'clean' vehicles that customs statistics allow us to monitor. 
 
Firstly, with regard to non-rechargeable hybrid vehicles, France, which, thanks to the assembly of the Yaris on its territory, enjoyed a large surplus (+ 450 million euros in 2019), is seeing this considerably reduced (+ 80 million in 2020) due to the stagnation of Yaris exports (around 85,000) and the explosion of imports (from 35,000 to 74,000 vehicles). 
This corresponds in part (8,000 vehicles) to the Renault Clio hybrid offer which, like the other Clios, corresponds to imports for France.  There is no reason to hope that the situation will improve for these vehicles.
In terms of rechargeable hybrids, hopes were higher because of the PSA offer and its success. Already in 2019, 8,200 PHEVs had been exported from France for 143 million euros, the first months of 2020. With almost 2,000 vehicles exported in January 2020 and more than 1,500 in February, hopes could be raised. The unit values of over 28,000 were also flattering and gave hope. However, already in 2019, France had a deficit of 28,000 vehicles and 559 million euros. 
 
In 2020, this deficit is 36,000 vehicles but 1.2 billion euros because the unit values are growing very significantly: they were respectively 17,459 euros and 19,583 euros for exported and imported PHVs in 2019; in 2020 they were 28,675 (+64%) and 32,519 (+66%).  The external deficit, which only increased by 10,000 vehicles, is more than double.
Finally, with regard to battery electric vehicles, 2019 was even more encouraging since exports were 54,000 vehicles and exceeded imports by 20,000 units. 
Even though the unit value of BEVs imported was almost 10,000 euros higher than the 19,000 euros per vehicle of those exported, this resulted in a surplus of 54 million euros. 
 
In 2020, the year of take-off, exports will grow by almost 30,000 units (+55%) but imports will grow by 65,000 units (+133%). The unit prices of exported vehicles are stable and, since those of imported vehicles fall slightly (from 28,770 to 26,140 euros) but remain much higher than those of exported ZO2s, Smart cars and DS3s, the 2019 surplus is transformed into a deficit of 474 million euros: EVs are responsible for a significant part of the deterioration in foreign trade in vehicles recorded in 2020.
In fact, in May, when the President announced the plan, the situation was less catastrophic. Certainly, in January, February and March, the launches of PSA's electric vehicles (208 in particular) involved significant import flows and a deficit in volume and value. 
Then, in May, June and July, exports were around 10,000 per month and imports remained below 9,000: even in value, France had a surplus. This has not been the case since August 2020, the Zoé has lost its ultra-dominant position on the French market and almost all the alternatives -except for the Smart which will soon be and the DS3 E-Tense- are imported -including at Renault which has started to import, in addition to its Spanish rechargeable hybrids, Slovenian electric Twingos and Chinese Dacia Springs.
At PSA, whose industrial choices have largely contributed to the evolution of foreign trade this year, the situation could improve somewhat since Mulhouse should progressively return to a more normal production rhythm within the framework of the launch of the new 308: in 2020 and until the summer of 2021, the site is confined to the top-of-the-range DS7 and Peugeot 508 cars, and the result is very limited production volumes (53,000 cars produced in 2020).  
The 308 will probably not bring back the 350,000 produced in the good years, but everything indicates that PSA's car production in France should return to more "normal" levels. 
As for electric vehicles, we learned in 2020 that the electric Opel Mokka was joining the DS3 and production started in December.  
 
In the longer term, the fact that Douvrin is hosting the "gigafactory" of the ACC JV formed with Saft and that Stellantis wants to equip itself with platforms dedicated to EVs suggests that a French BEV assembly could be structured and come to prove E. Macron, but much remains to be done and the Spanish, German and Slovakian sites will do everything to be - or remain - present at this meeting. 
At Renault, the evolution in 2020 was not very favourable since the announced "Renaulution" confirms the end of assembly at Flins, that the third BEV in the Renault brand catalogue (the Twingo) is imported, that the Spring is Chinese and that the first rather convincing HDVs and PHEVs (Clio, Captur, Megane) are all imported. 
Here again, we must be satisfied with the longer term announcements to reassure ourselves and hope that the Mégane and R5 or the electric ranges will come from 2022 onwards to give substance to the President's announcements which, for the moment, are only denied by the foreign trade and production figures: it will obviously take more than a few enthusiastic announcements in favour of electric vehicles and French excellence in this field to make decarbonisation an opportunity for a French site that the French constructors are doing their utmost to scuttle.
 
29/03/2021
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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