IT looks like a more racy version of the Audi TT — but the surprise is that it’s a Peugeot. The sleek coupé, labelled “concept car” on the Peugeot stand at last week’s Lisbon motor show, is destined to become a production model in 2010.

The announcement was made by Peugeot brand chief Jean-Philippe Collin, who explained that this was a new departure for Peugeot, the first of a series of “competitive premium cars” with which the French will fight back against the Germans.

Peugeot’s idea is to bring the qualities of a German premium brand such as Audi to a wider audience at a lower price. Its TT equivalent is the RCZ and it will sit at the heart of the range, creating a halo for the company’s more practical, everyday family cars.

Advertisements created by Citroën, Peugeot’s associate brand, emphasise the dilemma facing the French motor industry. A comic-book caricature of a German gentleman driving round the Fatherland in a new Citroën C5 is supposed to indicate that this is a German car in all but name and origin. A footnote explains it is made in France.

This is a matter of history. Paris became established as the centre of fashion after the second world war, and Citroën produced an icon with the DS in the decade that followed, but by the 1970s it was the Germans who had taken the high ground in automotive design and quality. Mercedes and BMW practically invented the “premium” car, engineered and built with more precision than cheaper models made in larger volumes.

While these German brands became status symbols, French cars catered for the mass-market. They were popular, but when French manufacturers tried to emulate the Germans with plusher, more comfortable saloons or sporty cars they invariably failed.

They still do. Only 184 of the big Peugeot 607s were delivered to customers in Britain last year. The equivalent Renault Vel Satis sold so few in this country that it was withdrawn from sale.

But now, when the BMW 3-series outsells the Ford Mondeo, premium brands are encroaching on the territory of what the French call the “generalists”.

The higher prices of the premium cars include higher profit margins. In their programmes to improve profitability, both PSA Peugeot Citroën and Renault are expecting a much bigger contribution from more expensive models. Hence Peugeot’s premium strategy, which promises distinctive models that are a cut above its normal fare.

Christian Streiff, chief executive of the PSA Peugeot Citroën group, said its two brands would have five of these models: “Competitive premium cars are a key element of our strategy. They will be introduced progressively into each segment of the market as individual models, not just versions of existing cars, and provide a premium offer in each sector.

“Our cost base and the use of existing component modules avoids the huge additional cost of a full premium car but gives the customer full value. There will be a sense of something special, of pleasing, distinctive design and of luxury materials.”

The Peugeot RCZ uses component sets from the 308 model, just as the Audi TT shares most of its mechanics with the Volkswagen Golf. It is the result of Streiff’s CAP 2010 efficiency programme to make better use of the group’s chassis platforms for the quicker development of a wider range of cars.

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