Fighting for customers in a market driven by SUV sales

The Peugeot 508 makes its debut in a UK network that has been stress-tested over the past 12 months

Almost every week a new SUV arrives on the UK scene, as the car market tide continues to ride a wave crest of SUV and crossover obsession. Over the past couple of months alone, launch events have been held for the Audi Q8, Range Rover Sport Plug-In Hybrid, Jaguar I-Pace, Hyundai Santa Fe and Tucson, Mitsubishi Outlander and Volkswagen Touareg, with international debuts of the new Jeep Cherokee, Mazda CX-3, Seat Tarraco, Nissan Qashqai, DS3 Crossback, Suzuki Jimny, BMW X5, Mercedes GLE and Audi Q3. It’s hard to keep up.

In the wake of this tidal surge is a jetsam of once-popular car types whose numbers are in steep decline, swept aside by the onslaught of taller and more versatile models. D-segment cars in particular are continuing on their steep downhill road, selling in significantly reduced numbers compared with a few years ago. Hence the recent news that Ford will not directly replace the Mondeo, once it has capitalised on the investment in the recently facelifted model. Not in Europe anyway, although there will be a successor produced in China.

So it is perhaps a bit surprising that Peugeot is eagerly batting for the mainstream mid-size saloon market with its new 508, a car that will have to fight for customers in the midst of the SUV flood. Not an easy prospect. But it’s one that Peugeot UK managing director David Peel seems to happily embrace, shrugging off the naysayers. Against some evidence to the contrary, he argues that there is still good mileage in the D-segment, and is confident that the rehabilitated 508 will do well.

Its design has moved away from a conventional three-box structure, following the trend for a more coupe-esque, five-door ‘fastback’ style. As well as looking a lot sleeker, the overall quality and driving calibre have shifted sharply up-scale too, giving Peugeot a more convincing player amongst the SUV alternatives. It has quite a surprisingly sporty feel from the driving seat and is nicely refined.

A particular target has been a focus on driving up the car’s three-year residual value, down at around a lowly 26% in the outgoing model. Steered by RV experts CAP and Glass’s, close attention has gone into deciding the range line-up of engines and trims, with the aim of giving the 508 “the best RV in the segment”. It is quoted at 44%. Is that possible? “Yes, and it puts us ahead of Audi, BMW, Mercedes, Jaguar, Volkswagen,” said Peel. “A French D-segment car is leading on predicted RVs. That’s remarkable but we have done it.”

Maybe, but the new 508 is still in the honeymoon zone, and RVs may slip once that is past? In defence of his confidence that it won’t, he cites the success of the 3008, launched with a forecast three-year residual of 44%, against an outgoing model on 36%, and an RV now at 54%. “We have done that because we’ve been very disciplined in our approach and have not done any distress selling in our range for over two years since my arrival. No month-end deals, no pre-registered cars. We tripled our volumes last year, but in a responsible way. The German brands have gone from prestige to volume, in my opinion they’ve overtraded in recent years, and they are starting to catch a cold.”

Peel’s background is 25 years in the retail motor trade, latterly seven years of running Robins & Day, the PSA-owned UK dealer group. He has been in his current role as Peugeot UK’s boss since February 2016, when the company was bottom of the NDA Dealer Attitude survey, at 30 out of 30. Under his regime it has climbed as high as seventh, although it is currently at 17th. There has been a degree of churn in the dealer network, too.

“We have stress-tested the network over the past 12 months. When you ask people to invest up to £150,000 to upgrade premises, it’s inevitable that some will choose not to come with you.”

So along the way Peugeot has shed more than 30 UK dealers to consolidate the network, set to stabilise at around 180 by the end of the year.

Next year’s target for UK 508 sales is 5,500, a 4.5% share of the D-segment, against rivals such as the VW Passat, Jaguar XF and prestige German brands. Meanwhile 2019 will be significant for Peugeot with new models of two of its key volume cars, the 208 and 2008. The lion brand has its claws out.

Sue Baker is a motoring writer, editor, broadcaster and columnist for Motor Trader