PSA, owner of the Peugeot, Citroen, DS and Opel brands, has just officially unfurled the first consumer-focused step of what it expects to be a 10-year plan with the announcement of its Free2Move program in Washington, D.C. Based around an app, it 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 charges for parking, gas, or insurance. Signing up is $10 and users may use the app to book with Bird, Capital Bikeshare, car2go, Jump, Lime, Skip, and Uber. Notably, none of Free2Move’s 600 cars in service are PSA products; rather it offers Chevy Cruze compacts and Equinox crossovers. On the eve of the program’s announcement, Larry Dominque, PSA’s senior U.S. executive, formerly of Nissan, and now stationed at PSA’s newly opened offices in Atlanta, spoke with New York bureau chief Jamie Kitman.
AM: So you’re just about to formally announce your new car sharing business. But it’s been soft-launched already?
LD: [Four] weeks ago. We put about a hundred of the cars out on the streets of Washington, D.C. Actually it was around 137. 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, to the registration process, to the back end, which is our operational side of our business. To make sure that the company we hire that’s cleaning and staging the vehicles, that that is working well.
So we wanted to do a little bit of a beta, in software terms, to try out the system and by giving people free minutes to try this out. Fortunately we haven’t had any glitches, but had you had any, put it this way, you’re a little more forgiving if someone gave you a free dinner [and there was a problem] then if somebody made you pay for the dinner.
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: 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. He loves using words like “robust execution,” “focus,” things like that. 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 dollars in the U.S. last year.
Washington D.C. is a fairly high cost city to do this, everything from the parking permits to insurance to parking; it costs a lot operating in this city. 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 made the choice of D.C. for a reason. 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.
So as we operate the business and my team gets 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 [for when] I believe we are mature enough.
AM: What’s structurally different about what you’re attempting?
LD: I think there are several differences. 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 an aggregation platform we launched a year ago. It’s more mature in Europe, just because it’s been there three years longer. But it’s an aggregation service where through our multi-provider registration, you can come into our app, you can put in your driver’s license information once and your credit card information once, and you’re registered for any of our partners that are on our system.
So in the city of D.C., as of this week, we have nine discreet programs. Carsharing, 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, you don’t feel like walking today, we have that available for you as well. And you don’t have to worry about going to half a dozen or 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 Smart cars and 25 percent Mercedes, so that’s different types of vehicles for different needs. For now, we’re running Chevy Equinoxes and Chevy Cruises in D.C., so we believe we have the right cars, and the right SUV. Nobody else right now offers an [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 we can see what the advantages to that might be.
LD: The way I’ve approached this and Carlos approached it with me initially—cause I started out doing some consulting for the group before taking this position—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 power trains manifesting themselves in North America versus other parts of the world?
So while we are in the process of homologating our own vehicles —which we’re already doing, but it takes a few years to do—we’ve made it very clear: we’re going to launch with mobility services, without our cars.
We’ve been very clear saying we’re going to launch without our cars, to learn how to operate the business. Ironically, under [another PSA Free2Move globally, we run a company called Euro Repar [Car Service,] where [our stores are] embedded in PSA dealerships—Peugeot, Citroen, DS, Opel—but we actually have separate companies, we own them, and it’s a separate service facility that repairs Fords and Volkswagen and Toyotas as well. We have Free2Move Lease in Europe which uses, not only our own vehicles, but other brands.
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 green field 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 and 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 we would imagine have quite a bit of good will—Citroen, Peugeot and Opel—in the United States. It raises the question of 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, oh no 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. We started the research before Opel was part of the family. 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: So 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 kind of product challenges existed, or what American sore spots of 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 easy, and they fixed it. But it took decades for them to fix the issue. 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 a great car, we could discuss the styling right, cause everyone’s style is a little bit unique, but having a great car, quality, reliability, safety, is just a cost of entry now. We make good cars.
So that’s just the starting point to even have a discussion about coming into the marketplace. And I’m very confident the cars we’re designing with full homologation for North America, with the right specs and features, the right size cup-holders—everyone jokes about cup-holders—the right size cup-holders is going to be there. I’m not worried about that.
But I’m still quiet on the brand because we’re not announcing it yet. Carlos says we’re finalizing a lot of decisions between the end of this year and the beginning of the first quarter of next year, and then we’re going be much more vocal externally after that.
When we’ve identified all the things related to the brand positioning, we know that we have one opportunity to re-enter the North America market successfully. Carlos is very quick to remind me that he and I are old car guys. And he’s only a couple years older than me so we’re in the same generational bucket, right? So we’ve been around this industry for 35, 37 years. We’ve lived through what has grown into the four square reality globally for car dealerships and the relationships between OEMs, consumers, and the dealer marketplace.
So he said let’s think about this as a sustainable business. Let’s step in and never have to step out again. How do we do that? We make sure we don’t over-leverage until we have the brand strength. Let’s focus on customer satisfaction, let’s focus on high margins, let’s not focus 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.
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, and understand, 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. So we want to develop a new kind of interaction with consumers that a lot of other OEMs just can’t do. 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] a lot of people have some very positive references to make and not just related to Louis Vuitton. People understand fashion and design and innovation come out of France in addition to luxury brands like Louis Vuitton and Hermes and great wine.
So when you associate French autos to American consumers, many of them say based on their other types of associations they think that’s really cool. They’re assuming the vehicles would have a certain kind of flair and uniqueness and design and so forth, but there’s not a negative association.
I would say where there’s a gap, as you can imagine, is in the foundational trust of “okay, I love the way this vehicle looks, I love the way this vehicle drives, I think it would be positioned here or there. But are they safe? Are they reliable? Are they dependable?” Those kinds of questions come up. As with any brand coming into the U.S. market, we have to prove those things to people, otherwise you may not be in their consideration. Because sometimes they’ll say “wow, that’s beautiful,” or “that’s gorgeous,” or “that’s innovative,” and then they’ll say “but I’ve never heard of that brand before.”
If Apple comes out with innovative design, people will flock to it because they trust Apple. If a new brand came out, and even though the design was as beautiful or more beautiful and more simple than Apple, people might still question whether they trust that brand, so we have to build that trust. That exists with any new brand that comes to the United States in any vertical, not just automotive.
Relative to our French brands, as you can imagine, Peugeot and Citroen 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 Citroen logo, and a lot of people know what those are.
DS is less known, but understand, DS has only been a brand for about five years. And it was never sold here.
AM: What about a 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?
LD: It’s interesting you say that. I used run product buying information on this, and one of the things that’s extremely critical for me, is I know the energy that all the OEMs use and trying to spend time differentiating their own individual brands. How Buicks are different than Cadillacs, how Chevy is different than Buick, how’s Infiniti different than 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.