PSA, owner of the Peugeot, Citroën, DS, and Opel/Vauxhall brands and which announced its intention in 2016 to return to the North American market by 2026, unfurled the first consumer-focused step of what it expects to be a 10-year plan when it trial-launched its Free2Move program in Washington, D.C. Based around an app that proposes to offer District residents total mobility at a flat price—from cars and SUVs to electric scooters and bicycles to ride-sharing services like Uber and Lyft—with no extra charges for parking, gas, and insurance. Signing up costs $10 and users may use the app to book with Bird, Capital Bikeshare, car2go, Jump, Lime, Skip, and Uber. Notably, none of the 600 cars in service will be PSA products, but rather Chevrolet’s Cruze compacts and Equinox crossovers. On the occasion of Free2Move’s launch, our New York bureau chief Jamie Kitman spoke with PSA’s senior U.S. executive Larry Dominque, formerly of Nissan and now stationed at the French company’s newly opened offices in Atlanta.
Automobile Magazine: So you just have officially announced your car-sharing business. But it was soft-launched prior to that?
Larry Dominique: Four weeks before. We put about 137 of the cars out on the streets of Washington, D.C. We had put some marketing stuff out there and allowed some hand-raisers to register for the system and we gave them promotional access. Because we wanted to make sure that everything is working very, very well from the applications standpoint—how you book it, how you find the cars, the registration process, the back end.
We wanted to test everything out because everything we’re trying to do in North America is related to high customer satisfaction. Everything we want to do must be done with quality. I didn’t want to launch anything in scale until I had confidence that everything was going to be working perfectly.
AM: You could argue that even that the hard launch is sort of a beta because it’s in only one city. How soon do you see yourself expanding into other cities?
LD: Great question. One of the things that my CEO [Carlos Tavares] believes in is profitability. He likes margin, and he likes managing frugally and with high agility. So we’ve looked at what other car-sharing businesses have done. Enterprise has bought into cities and gone out of cities; car2go has bought into a lot of cities, and they lost $60 million in the U.S. last year. Washington D.C. is a fairly high-cost city to do this, so what our team has done is set up a very lean operation. I’m very confident it will turn around to profitability pretty quickly. We looked at many different cities, we looked at population density, income, openness to mobility and alternative transportation, and we chose D.C. as one of the top cities that we felt was right for mobility services, in particular car-sharing. As we get a good understanding of the financials and how to operate car-sharing efficiently, we’ll be ready to jump to the next city. We’re already identifying other potential candidate cities.
AM: Where do you guys see yourselves as differing in your business model from the companies that have been doing this unsuccessfully so far? What’s structurally different about what you’re attempting?
LD: On the experiential side, we believe the front end of our app is better than most, and we’re going to continue to roll out new features. Things that attract loyalty, things that we believe will make the access to the vehicles easier, faster, more reliable, more consistent. In concert with our Free2Move car-sharing, we’re launching our Free2Move aggregation app as well, which incorporates our car-sharing in it.
AM: What else does Free2Move Aggregation include?
LD: Free2Move Aggregation is a platform we launched here a year ago where, through our multi-provider registration, you can come into our app, put in your driver’s license information once and credit-card information once, and you’re registered for any of our partners that are on our system. In the city of D.C., as of this conversation, we have nine discreet programs. Car sharing, bike sharing, scooter sharing, and so on. We’re going to be incorporating ride-hailing soon.
Aggregation is nice in the sense that is gives you access to what we call First Mile/Last Mile, so if you want car-sharing or ride-hailing you can get it. If you just want an electric scooter to go six or eight blocks, we have that available as well. And you don’t have to worry about going to a dozen native apps. You can do it all through our app, and all the billing and everything else is taken care of.
Even though they’re a competitor for Free2Move car-sharing, car2go are on our aggregation platform. Primarily because we believe there’s a big enough marketplace out there for everybody to participate. Also, they run about 75 percent Smarts and 25 percent Mercedes, so that’s different types of vehicles for different needs. For now, we’re running Chevy Equinoxes and Chevy Cruzes in D.C., so we believe we have the right cars and the right SUV. Nobody else right now offers a [car-sharing] SUV, but we do.
AM: I guess on some simplistic level that’s one of the surprises—that you would be opening with somebody else’s cars, although I can see what the advantages to that might be. It seems like this plan is well-suited to allowyou to kind of grow up in semi-public, without the same pressure that you would have if you were like, “Here’s our new models” or “Here’s our new dealer network.” Whereas using other peoples’ cars eases you into the market and sort of forestalls a cruel judgment day.
LD: A cruel judgment day is probably a relevant commentary. The way I’ve approached this and that Carlos approached it with me initially is [based on the fact that he] understands really well there are 42 brands and 430 something models for sale in the United States. Incentives hover around 11 percent [of transaction prices]. Intra-brand competition in some places is worse than inter-brand.
So how do you come into this amazingly large market and focus on C and D segments, which mean high transaction prices in theory, high profitability, and do it successfully? We discussed this for a long time. And the focus needs to be on being different in everything we do. And that means not just in customer experience, but also how you structure the business and how you invest.
The biggest mistake most companies make is over-investment, and then the moment there’s an initial downturn, their fixed costs are way beyond their revenue, and they’re in deep, deep trouble. We want to avoid that. And how do you avoid that? By planning well and making sure you understand very, very well the trends, the consumers, the behaviors, their wants and desires. How is mobility as a service saving car-ownership patterns? What are we seeing geographically? How are alternative powertrains manifesting themselves in North America versus other parts of the world?
So while we are in the process of homologating our own vehicles—which takes a few years to do—we’ve made it very clear: We’re going to launch with mobility services, without our cars. If I have a business, and there’s an opportunity to make a good business case and learn from it, if I need to put GM vehicles in, I’ll put GM vehicles in. I’ll use anybody’s brands. I don’t care as long as they’re the right car for what I’m trying to accomplish. I don’t think we’re ready to actually launch our retail sales. But through everything we’ve learned and the planning we’ve put in place, I think we’re going to be very well positioned.
And I think, just to be very clear, we have no legacy in North America. I have no dealer networks, I have no dealer contracts, I have no service contracts, I have no IT contracts, I literally have a greenfield opportunity in North America.
AM: Must be exciting. It’s really almost impossible to imagine anyone else having such an open field to run on.
LD: Exactly, and trust me I’ve had lot of calls from my friends at other OEMs saying, “Larry, you have an opportunity that we can only dream of.” They can’t tear down what they’ve already got.
AM: PSA actually has in its quiver a lot of brands that I would imagine have quite a bit of good will—Citroën, Peugeot, and Opel—in the United States. I think those can credibly be sold as mildly upscale, reasonably premium vehicles, which is a good thing. And there is a base of people who are familiar with the brands and would be excited to buy one of their cars. Which brands do you think make the most sense for North America? What does your research tell you?
LD: Some of the most fun I’m having is listening to all the different guessing that’s going on out there in the marketplace. Every time there’s an article in Automotive News and it talks about the brand, people are saying, “Oh, it’s gotta be DS—no, it’s gotta be Opel. Oh, it’s probably gonna be Peugeot.” Right? So we’re hearing a lot of these different things.
We’ve identified the brand. I know [PSA CEO] Carlos [Tavares] is cryptic, and we’ve been cryptic for a reason. But we’ve done the research; we wanted to understand. One of the things we wanted to understand is what is the awareness level? What is the perception of the brands and the company or being French? What does it mean to American consumers and Canadian consumers?
And the great news, to your point, is a lot of people had very positive reactions to a French automaker. They thought it was different. We did static clinics with the vehicles. We did dynamic clinics with the vehicles, including competitors and so forth, and I’m very, very pleased with the response we got from American and Canadian consumers related to all of our brands.
So we don’t start out in negative position in anyway. It’s interesting because if you resurrect another French brand from the past, the response was much more negative.
AM: That would be Renault?
LD: Yeah. And they injured the brand with the Alliance, they had some major market issues with some of those cars, and that still resonates with people in their minds.
AM: What do you mean major market issues?
LD: From our point of view, what I wanted to make sure is, I wanted to understand where our brands resonated, where we had challenges, what opportunities existed, what sore spots were there from already existing products. So the great news for me is people are open to us. When you look back 60 years ago when the Japanese came in for the first time in the late ’50s, the cars were basically crap. They were small compared to the U.S. cars, they were underpowered, they rusted easily—and they fixed those things. But it took decades for them to fix the issues. The Koreans came in 30 years ago, and also their products were not very good. Today they are.
The great news for me is our products are already globally competitive, and having quality, reliability, safety, is just a cost of entry now. We make good cars. And I’m very confident the cars we’re designing with full homologation for North America, with the right specs and features—including the right size cup-holders. We’re going be much more vocal externally [about which brand] in the first quarter next year. We know that we have one opportunity to re-enter the North America market successfully.
We will focus on customer satisfaction and on high margins, not on market share. If I’m bringing vehicles over for the time being from Europe, and plants in Europe, they’ll make a marginal contribution to an existing marketplace. Yes, we have to invest uniquely to build some products in North America, but for the most part, it’s using existing plants we have, which means I don’t have to pay for a billion-dollar plant, divided by every car I sell. You can focus on margin per vehicle sold.
AM: Well all the discussion of margin makes me think that you would come with some sort of SUV since they seem to carry the biggest margins.
LD: What I sense is very clear externally and internally: You cannot ignore the four key segments, you can’t ignore C-sedan or whatever you want to define as a future sedan.
AM: You mean the way Ford Motor Company is.
LD: I hear you, and look where their stock is.
You need an unique value proposition. We’re not thinking of the value proposition as merely the vehicle, we’re thinking of our value proposition as the buying process, the sales process, the ownership process, the high-end mobility. We believe that part of our value proposition is not only having great differentiated vehicles, beautiful design, great features, with the right performance, with the right DNA to be French, and to be the brand we’re bringing to the market, but it’s also that whole attached experience to the whole process, and what differentiates us from other brands.
From a French brand point of view, just being French, I was very pleased to learn [from research, that] people understand fashion and design and innovation come out of France in addition to luxury brands like Louis Vuitton and Hermès and great wine. American consumers think the vehicles would have a certain kind of flair and uniqueness and design and so forth, but there’s not a negative association.
Relative to our French brands, as you can imagine, Peugeot and Citroën have a history here in the United States, and people know of them. Older people know them directly through friends, family, themselves. Younger people know some of the brands, or they have an uncle that had a 504 or something like that. But you show them the logos, and many people are aware of the logos. And you can just show them the Peugeot logo, show them the Citroën logo, and a lot of people know what those are. DS is less known, but DS has only been a brand for about five years and has never been sold here.
AM: I’m guessing it’s probably a choice between Citroën and Peugeot, but at the same time it occurs to me that you could actually have the luxury of having a dealership or portal where you could buy or get all three brands or even four brands, and each of the brands could be represented by a model. There could be one Peugeot and one Citroën and if they’re all together in the same place, what’s the difference? You get something that’s greater than the sum of its parts in terms of excitement and interest.
LD: It’s interesting you say that. One of the things that’s extremely critical for me, is I know the energy that all the OEMs spend differentiating their own individual brands. How Buicks are different from Cadillacs, how Chevy is different from Buick, how Infiniti is different from Nissan. And if you’re going to successfully and organically build the brand, you have to focus on that brand, just the single brand. It’s not to say in the future once you’re well established and positioned, you could potentially bring another brand in, but we’re going to focus on a single brand.