Renault is in the struggle for survival

Because the core business is already weakening: As the company announced on Monday, sales of the group, which also includes Dacia and Alpine, fell by 4.5 percent in 2021 to around 2.7 million vehicles. The core Renault brand sold almost 1.7 million vehicles, a drop of 5.3 percent.

When de Meo took over the management of the company 18 months ago, Renault was already fighting bankruptcy. The new CEO drafted a future program called “Renaulution,” which combines hard-hitting cost-cutting with a focus on a greener and higher-priced product range.

In the medium term, the traditional company is to become a software-driven technology group. Can the bet work? In any case, French industry experts call de Meo the “CEO of the last hope”.

The French blame the difficult market environment during the pandemic and the lack of chips in car production for the falling sales. The former VW manager sees himself on the right track in two areas that stand for the new strategy under de Meo: Renault was able to increase sales of electric and hybrid cars and strengthen its sales in more profitable segments.

The Zoe lead is playful

But the car expert Ferdinand Dudenhöffer doubts that the rescue can succeed in this way. The Renault boss’s plans are “more marketing than a big program,” he says. “But what else is he supposed to do?”

Dudenhöffer points out that all car manufacturers have just said goodbye to the combustion engine. It doesn’t help that Renault was a pioneer with the Zoe electric model ten years ago. The company gambled away this lead – and now has to compete with major competitors like Stellantis from a position of weakness.

Dudenhöffer is also skeptical about the new focus on higher-class vehicle segments. The brands of the Renault Group simply lack “substance” here, says the expert from the Center for Automotive Research at the University of Duisburg-Essen. His prognosis: “It should be very difficult in this struggle for survival.”

For years, Renault had focused on mass in the alliance with the Japanese car company Nissan, and the former boss Carlos Ghosn stood for this orientation. This was initially successful with his strategy, the tough renovator made Renault-Nissan the largest car manufacturer in the world in terms of sales in 2017. But the low margins proved to be a problem at the latest when the car market collapsed in the corona crisis.

But Renault got into the downward spiral before that. The conflicts in the alliance with Nissan became more and more obvious. The turbulence reached its peak when Ghosn was targeted by the Japanese judiciary for allegations of tax evasion and breach of trust. The boss had to resign – and later, under adventurous circumstances, fled from house arrest in Tokyo to Lebanon in an instrument case.

In early summer 2019, a merger between Renault and Fiat-Chrysler was briefly discussed. The American-Italian group then backed down, annoyed by the conditions imposed by the French state. A year later in the pandemic, France’s Economy Minister Bruno le Maire warned: “Renault is fighting to survive.” Paris provided an emergency loan of five billion euros, and in 2020 the carmaker posted a record loss of eight billion euros. So far, de Meo has been reluctant to give concrete figures for 2021, the company will only present the financial results in February.

From “Resurrection” to “Revolution”

De Meo has been in charge of Renault since July 2020. The Italian previously held a number of top positions in the Volkswagen Group, most recently heading the Seat brand for almost five years. The Meo designed a three-stage rescue plan for Renault: In a phase called “Resurrection”, the company should come out of the red with an austerity plan by the end of 2022.

The “renovation” phase will run parallel to this until 2025, which is about shifting the emphasis in car production from mass to profitability. Among other things, Renault is planning a dozen new electric models, especially in the compact and mid-range. From 2025, de Meo has the “revolution” in mind: the change “from a car company that works with technology to a technology company that works with cars”.

At the end of last week, de Meo took stock of the ambitious program at the company’s “Technocentre” in the Paris area: the group achieved its goal of reducing fixed costs by two billion euros last October. This puts the company a year ahead of schedule “despite severe headwinds” such as the chip crisis. Because of the delivery problems with electronic components, Renault had to forego the construction of around 500,000 cars.

De Meo expects the lack of chips to continue to weigh on business this year. Basically, the Renault boss was very optimistic: the sales prices had increased by an average of six to seven percent in the past twelve months.

This is also due to the lack of chips: the scarcer supply of new cars leads to higher prices in the car dealership. At the same time, the development costs for new models could be reduced by 40 percent. The company is currently working on its “most competitive product range in at least 30 years”.

When it comes to networked mobility, the Renault boss is pinning his hopes on Luc Julia, who is said to be the father of Apple’s voice assistant Siri. The artificial intelligence expert has been the carmaker’s digital boss since spring 2021. By 2030, the group aims to generate at least a fifth of its revenue from mobility services, data and energy trading.

In the coming weeks, the Mégane E-Tech will be launched, the first major sales test under de Meo’s new strategy. The model is manufactured in Douai in northern France. Renault has already invested almost half a billion euros in the plant, which, together with two other locations in the region, is to become the heart of the production of electric cars. The French company proudly speaks of its “ElectriCity”, which is also said to include a gigafactory from the Chinese battery manufacturer Envision AESC.

Investors do not yet believe in the turning point

“There was a lot of talk about Tesla locating near Berlin,” says de Meo. The industrial center for electromobility that Renault is planning in northern France is in no way inferior. He says confidently: “We want to play in the Champions League.”

However, investors do not seem to believe in the resurrection of Renault. The market capitalization of the French is around ten billion euros. Tesla, which sold less than half as many cars as the Renault group last year, is worth about 100 times that on the stock market.

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