PSA Peugeot-Citroën is to offer pre-paid cars by the day to young city dwellers as part of the French motor company’s drive to regain market share and enhance the appeal of its brands with consumers and investors.

The new business, branded Mu, is to be launched in Paris, Berlin and Amsterdam this winter and will reach Britain before the summer. Within less than a year, Londoners will be offered “pre-paid mobility on demand” from Peugeot dealerships through a payment card that offers consumers the choice of a car, a small van or a scooter for a day or a weekend.

Peugeot-Citroën’s leap into the rental market emerged in a presentation by Peugeot-Citroën management yesterday in which Philippe Varin, PSA’s chief executive, promised to bring the French company back into profit, achieving €3.3 billion in operating margin by 2012. Mr Varin said that he expected a steady improvement adding €1 billion to operating profit each year through improved sales and margins in Europe, cost-cutting and by increasing the company’s weak market share in China.

Speaking at the company’s research facility in Paris, Mr Varin forecast positive cashflow for the year and said that sales were stronger than predicted in July, with the group’s third-quarter market share increasing 0.5 per cent. As a result, output from Peugeot- Citroën factories will rise by 17 per cent in the fourth quarter over the third, a 30 per cent uplift from the last quarter of 2008.

PSA predicted in the summer that the company would lose between €1 billion and €2 billion in 2009 but the company now expects to break even in the second half.

A little more than half of the forecast profit gain will come from cost reductions, including more efficient manufacturing and shrinkage of the French workforce over the next three years, a loss of 6,000 jobs, or a tenth of the headcount. Overhead reductions will cut costs by €400 million, including the company’s loss-making chain of dealerships.

The chief executive said the industry faced many challenges: growth in Asia, ageing consumers in mature markets and more urban consumers wanting smaller, cleaner cars with reduced carbon emissions. PSA’s market share in China was too low, Mr Varin said. “With 3 per cent market share we cannot amortise costs.”

The company will seek to raise its European share with an assault on the company leasing market and by improving service to customers, he said. “We are not going to be a service company but we want to broaden our service offer,” he said.

Breaking an industry taboo, PSA also gave investors and analysts a private view of models still under wraps, including the RCZ, the first Peugeot sports car in decades, and the DS3, an upmarket compact hatchback, intended to compete with the Mini. Both are to be launched next year.

The reaction from investors, tired of bad news, was largely positive but the forecasts of rising market share also drew a sceptical response. Adam Jones, a car industry analyst with Morgan Stanley, said the figure of €3.3 billion was “perfectly achievable but it depends on sales”. PSA was too dependent on mature markets, he said. “They need to sell more cars, cuts costs and get out of Europe.”

On the Muve

The Mu concept, targeted at young people in cities, is part of Peugeot’s higher service strategy but has the added benefit that it will generate income from the stock of vehicles sitting in dealership car parks, a huge drag on dealer profitability.

Mu customers will be able to load mobility points on to a card which entitles the user to a vehicle. The pilot schemes in France offer a Peugeot 207 for 280 points per day, a cost of €56 (£50). For about the same cost you could instead rent a Peugeot scooter for three days and for only 25 units, or €5, you could rent a bicycle for a day.

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