French race to drive luxury market

On a shiny black stage at the Paris motor show this week, start-up Exagon Motors displayed its baby: The Furtive eGT, France's most luxurious automobile.

Exagon executives brag their E400,000 ($501,000) hybrid comes with customisable leather interior, rigid carbon-fibre frame and body, and two powerful electric engines. But, while rich on technical prowess, Exagon's vehicle is missing an element that traditionally surrounds luxury goods: a legacy.

Despite France's long list of luxury brands, from Veuve Clicquot to Chanel to Falcon business jets, the country has struggled for more than a half century to break into the luxury car market that is now dominated by a quartet of German auto brands: BMW, Mercedes-Benz, Audi and Porsche.

“In France, which is, after all, the country of luxury goods, there is a big hole in the automobile sector,” says Exagon chief executive Luc Marchetti, who owns auto racing team Exagon Engineering. The company has orders for 60 vehicles and hopes to begin deliveries early next year.

Marchetti isn't alone. France's biggest carmakers Renault and Peugeot Citroen are eager to put an end to a prolonged absence from the luxury segment that has left them vulnerable to the region's slowdown. Their mid-range vehicles are under a two-pronged attack by premium brands such as Mercedes, which is moving downmarket, and by new Asian rivals aggressively expanding in Europe.

The result is a squeeze on profits that is hitting mass-market suppliers the hardest. In the first half of this year, for instance, Porsche had an operating profit margin of 18.7 per cent. By contrast, Renault's automotive division was barely profitable and Peugeot Citroen's automotive division was deeply in the red. French carmakers are trying to find a way out with a new luxury recipe.

“To be on premium car buyers' shopping list, your brand must be positioned high enough, and to elevate your brand you need to be selling high-end cars,” said Frederic Saint-Geours, head of brands at Peugeot and Citroen. “We're trying to jump-start such a virtuous cycle.”

As part of their new push into luxury, Peugeot is upgrading dealerships with a more exclusive experience; Renault is digging into its portfolio to see what old brands might appeal to luxury-car buyers; and in some cases both companies have consulted with major fashion house designers for advice.

The results of those efforts are on display this week at Paris's auto show. Last week, Peugeot showed a new, convertible version of its successful DS3 sub-compact, one of a new series of DS prestige cars that it hopes will pull its Citroen brand upmarket. The company has sold 250,000 DS cars since their 2010 launch. Renault, meanwhile, is close to a decision on reviving with a partner its Alpine sports car brand.