PSA_GROUP_REGISTRATION_DOCUMENT_2017

GROUPE PSA Risk Factors

Operational risks

Risk management and control processes The Automotive Programmes Department aims to translate the Groupe PSA’s strategy into product plans and ensure their implementation by steering the development of vehicle and subassembly programmes and being responsible for their economic performance. The Automotive Programmes Department has a “Strategy” unit for anticipating deep-seated changes in market structure. This facility helps predict future-year changes in the energy mix (internal-combustion/PHEV/electric). The Group relies on an operational development plan, regularly updated and optimised, thanks to project experience feedback conducted in cooperation with our partner car manufacturers. For each vehicle and subassembly project, a set of product services, profitability, quality and time-to-market objectives are set. Progress in meeting these objectives is ensured by a system of project milestones approved by the Executive Committee. In addition, the Quality Department authorises (or refuses) the sale of each vehicle that leaves the production line and organises any necessary recalls of faulty vehicles delivered to dealers or customers. The Group attaches the utmost importance to exchanges with regulatory authorities to anticipate design plans and capital expenditures required to meet scheduled changes in regulations. Concerning the approval of its vehicles by regulatory authorities, the Group notes that they comply with the various pollutant emissions regulations. 1.5.1.3. EMERGENCE OF NEW BUSINESS MODELS FOR NEW MOBILITY Risk factors The market shows a strong trend towards new forms of mobility such as car-sharing, car-pooling, and connected services. This creates opportunities that are also available to new market entrants, mostly from the digital industry. These players from outside the automotive industry seek a positioning in the automotive value chain that directly competes with the “natural” place of car manufacturers and helps said players take advantage of the margins offered by the new technologies. Insufficient control of the advances of these new players or the absence of the Group from these new markets and consequently its lack of exposure to these new business models would represent a risk to Groupe PSA. Risk management and control processes The Mobility Services Department addresses the need for the Group to participate in a strong and visible manner to the mobility and future connected services value chain. In 2016, Groupe PSA announced the creation of its Free2Move mobility services brand which brings together all of its connected mobility services offerings, including: B2C and C2C car-sharing; „ B2B car-sharing; „ networked fleet management; „ smart services: with all advanced mobile services to customers, „ by creating an ecosystem with other partners; rental activity. „ RISKS RELATED TO THE

1.5.1.

RISKS RELATED TO THE GROUP’S

1.5.1.1. ECONOMIC AND GEOPOLITICAL ENVIRONMENT Risk factors

In 2017, Groupe PSA’s earnings were still largely dependent on the European market and to a lesser extent the Chinese market. The Opel Vauxhall acquisition increases this dependence on the European Market. The Group’s activities particularly in the British markets (since Brexit), and the Russian, Brazilian and Argentinian markets, naturally expose it to exogenous risks such as currency risk, adverse changes in tax and/or customs regulations, and geopolitical events. Furthermore, the increasing part of electrified powertrains with batteries integrating rare raw material represents a risk of batterie procurement (geopolitical and shortage). Risk management and control processes With the aim of limiting such risks, strategy consists of expanding internationally in order to reduce the Group’s dependence on its historic markets, and to protect itself from protectionist policies introduced by certain countries to foster the development of a domestic automotive industry. The Group’s international expansion, an integral part of the “Push to Pass” plan, led in 2016 to a strong involvement in the Maghreb countries of North Africa and the Mediterranean region (particularly with the start of operations at a plant in Morocco and the signing of joint venture agreements to produce latest-generation vehicles in Iran), and in early 2016, to the signing of a joint venture to produce vehicles in India and Algeria. The Executive Committee steers and controls the Group’s activities through the “Push to Pass” plan and the progress of its action plans. The decision to develop new vehicle models or subassemblies and to introduce them in the market is backed by marketing and profitability studies carried out several years prior to their actual launch. In the context of an increasingly responsive automotive market, this time gap puts forecast volumes at risk and ultimately generates a financial risk (loss of value of fixed assets, payables to suppliers who would have invested based on estimated volumes). The development of vehicles and subassemblies is exposed to continuous changes in regulations which impose increasingly stringent requirements, particularly in terms of fuel economy and emissions of CO 2 and pollutants. For more information on the Group’s policy on fuel economy and emissions of CO 2 and pollutants, please refer to Section 2 below of this document. These changes, together with strong consumerist trends, may determine structural modifications in the market (for example, the internal-combustion/PHEV/electric mix in the French market), to which the manufacturing facilities cannot always adapt immediately. Technical risks related to product quality and safety can lead car manufacturers to recall vehicles. NEW VEHICLE DEVELOPMENT, 1.5.1.2. LAUNCH AND MARKETING RISKS Risk factors

25

GROUPE PSA - 2017 REGISTRATION DOCUMENT