PSA - 2019 Universal Registration Document

GROUPE PSA Risk factors DPEF.B

RISKS ASSOCIATEDWITH THE GROUP’S ABILITY TO SELL ELECTRIC VEHICLES

1.5.1.2. AT A PROFIT HIGHRISK

Riskfactors

Riskmanagement andcontrolprocesses

Theadventof electricandplug-inhybridvehiclesis fuellinga price war betweencar manufacturers in orderto win significantmarket shares. Against this backdrop, Groupe PSAis also faced with increasinglydrasticand stringentemissionsregulations in orderto meetcompliance targets.Since2019,all the newmodelslaunched by the Grouphave been offeredin a rechargeablehybridor full electricversion.Ordersfor low-emissionvehiclesare encouraging andcomplywiththeGroup'sobjectives tomeet,fromdayone,the requirements of European 2020 standards in terms of CO 2 emissions(averagetargetfor car manufacturersof 95 g / km of CO 2 fornew passenger cars sold in 2020). The industryis also witnessingan increasein costs as a result of monopolisticbehaviouron the partof rawmaterialssuppliers.The Groupestimatesthat today 40% of the cost price of an electric vehicle corresponds to the cost of theelectric battery.

In an attempt to counteractthese continual price hikes and reduce its dependence on the supply of rare materials, Groupe PSAdecided to widen its panel of suppliers,amongst otherthings,in orderto improveits competitivenessuchas, for example,withBYD. The association with the French Saft battery manufacturer (Groupe Total subsidiary) to develop a European battery gigafactorywiththesupportof theEuropeanUnionwouldenable new generations of lithium-ionbatteriesto be brought to market. In order to maintain control over our powertrain business, Groupe PSAcreated a joint venture with Nidec Leroy-Somer focusing on designing and engineering, developing, manufacturing and selling electric traction motors.

RISKS ASSOCIATEDWITH POOR PERFORMANCE OF GROWTH DRIVERS OUTSIDE

1.5.1.3. EUROPE HIGHRISK

Riskfactors

Riskmanagement andcontrolprocesses

Groupe PSAhas a very strongfootholdin Europewhichmakesa significantcontributionto its profits.The Group'sEuropeansales represented nearly87%of its consolidatedworldwidesalesin 2019. Thebreakdownof theGroup'sglobalsalesis presented in chapter 1.3.2.1.3 Somekey figures . To protectagainstthis dependency, the Grouphas a presenceon other continentswhereit has industrial and sales sites. It is, however,difficultto developthe competitiveness neededto makeinternational expansionprofitable. In fact,on an international level,theGroupis subjectto increasingly stringentregulationsand hasto manage theunder-use of its industrial capacity. TheGroupis alsoexperiencing a slowdown in certainkeymarkets suchas LatinAmerica,particularly in Argentina.On othermarkets, suchas Chinaor Russia,lowbrandvisibilitythreatensan exit from these markets. Lastly,withtheforcedwithdrawal fromIran,theAfrica-Middle East Regionwill have to find robust alternativesto make up for lost sales. For more details on the group's markets, read chapter 1.3.2.1.2 The group's markets . [DPEF.B] [DV.8] Local sourcing in host territories It is crucial to stimulatelocal productionto supportthe Group’s increasinginternationalisation and reduceinequalitiesin terms of economic developmentin the areas where the Group has a presence.

The Companyhas introduceda numberof measuresto protect itself againstany additionalrisk due to the cyclicalnatureof the markets. To ensure a high level of flexibilityin terms of both forwardplanningand action,the five Regionsmanagetheir own business plans in order to contribute to the Group’sperformance. In addition to major cross-functional principles, specific measures have beenputin place. For example,the developmentof the Russia-EurasiaRegionhas now been entrustedto the Opel brand which aims to make a comeback on the Russian market. India,wherethe Citroënbrandis due to launchin 2020.Malaysia and Indonesia will constitutenewstrategicoutletsforthe Group. Theramp-upof the Kenitra plant inMoroccoand our expansion in Algeria will strengthen our positions i the Maghreb and Sub-SaharanAfrica. Lastly, in 2010, a specificplan will be devisedfor China which should allow fora return to profitability and growth. Groupe PSA is aimingto increaseits sales outsideof Europeby 50% between now and 2021. Giventhe economicchallengesof its presencein host countries, the Group is committed to make supplier relationship management a key element of its strategy. TheGroup implements twokinds ofmeasures: it identifies localsuppliersandhelpsthemacquirethe skillsthey > need; it encourages its existingsuppliersto moveto clustersnear its > facilities. (See 2.3.1 and CSReport 8.1)

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GROUPE PSA - 2019 UNIVERSAL REGISTRATION DOCUMENT