Peugeot buys used car retailer in diversification push

By Gilles Guillaume and Laurence Frost

PARIS (Reuters) - PSA Group, the maker of Peugeot, Citroen and DS cars, said on Monday it was buying a stake in a French online second-hand car retailer as it expands into new areas of business.

The carmaker is in exclusive talks with multi-brand car retailer Aramisauto to purchase a 30 percent holding, before injecting more cash through a capital increase to secure a majority stake, PSA said. Financial terms were not disclosed.

The deal will unlock "strong growth potential in a second-hand market that is twice the size of the new car market, but where we currently have little presence," said Marc Lechantre, head of the Paris-based company's used cars division.

Faced with the rise of car-sharing and digital mobility operators like Uber, many carmakers are eyeing an expansion into new businesses outside the traditional manufacturing and sale of new cars.

But PSA is going further than most under Chief Executive Carlos Tavares, who is also slashing production costs in the wake of the company's 2013-14 brush with bankruptcy.

Besides flagging a push into car-sharing, Tavares pledged to turn PSA into a leading player in multi-brand vehicle repairs and second-hand sales when he unveiled the second stage of a recovery plan in April.

The group is targeting a five-fold increase in parts sales through Mister Auto, the low-cost online retailer it acquired last year. It also plans to launch car-sharing services in Los Angeles in partnership with Bollore Group.

PSA has shed some 7,200 French jobs in the past two years and continues to reduce headcount through voluntary departures. The company declined to comment on reports that another 2,000 positions will be eliminated in 2017.

Lechantre said the acquisition of Aramisauto, with 360 million euros ($403 million) in annual sales, would help PSA double its second-hand car sales to 800,000 vehicles by 2021. The group will also bolster its own Peugeot and Citroen used-car networks and launch similar operations for the younger DS brand.

Founded in 2001, Aramisauto reconditions vehicles at a dedicated factory and draws about 1 million monthly visitors to its site with the offer of home vehicle delivery and pickups, backed by a returns policy that includes full refunds.

($1 = 0.8928 euros)

(Reporting by Gilles Guillaume and Laurence Frost; Editing by Mark Potter)