Renault CEO Luca de Meo on Thursday questioned the wisdom of the price cuts his rivals have implemented in a bid to boost market share for their electric vehicle fleets.
“We’ve seen competitors up and down prices, etc., etc. it’s their decision. But I don’t think that’s a very healthy long-term practice,” he told CNBC.
“As electric cars ramp up in Europe, we need to have a healthy business, and so in the case of Renault, the last thing I’m going to do is compromise on the margins of, you know, electric cars . “
De Meo’s comments follow a series of aggressive price cuts announced by automakers You’re here And Ford amid pressure to remain competitive in a booming electric vehicle market.
Tesla threw down the gauntlet with its announcement in mid-January of price reductions for all models marketed in the United States and for its Model 3 and Y in Europe. Ford followed on Jan. 30 with price cuts for its Mustang Mach-E electric crossover.
However, De Meo cautioned that volatility in selling prices could erode consumer confidence in EV products.
“Our priority will be to champion customer value,” he said. “Because those kind of swings are kind of value destroying for the customer, think about the residual value, etc.”
Longtime Renault allies are joining the French automaker’s electric vehicle push, with Nissan pledging earlier this month to buy up to a 15% stake in Renault’s Ampere electric unit as part of a a broader overhaul of the 24-year-old business union. Under the revamped, previously unbalanced alliance, Renault will reduce its stake in Nissan from around 43% to 15%.
“My job is to make the Ampere case so interesting for them [Nissan and junior alliance partner Mitsubishi] that they will decide in their capital allocation meetings to put money into it and not into an alternative project,” he told CNBC, adding that the investment was not a condition of restructuring.
Renault Scénic Vision concept car at Brussels Expo on January 13, 2023 in Brussels, Belgium. The Scénic Vision has an electric motor powered by a 40 kWh lithium-ion battery, rechargeable by a 15 kW hydrogen fuel cell.
Sjoerd Van Der Wal | Getty Images News | Getty Images
Earlier on Thursday, Renault announced that its group’s operating margin had doubled to 5.6% in 2022, from 2.8% a year earlier, even as net profit fell to a loss of 700 million euros. ($748 million). It came after the company in May reversed a 2.3 billion euro write-down linked to the exit from its Russian positions.
Renault recorded a record cash flow of 2.1 billion euros last year, against a forecast of more than 1.5 billion euros. Net income from continuing operations increased to €1.6 billion, from €549 million in 2021, while group revenue increased slightly to €46.4 billion in 2022, from 41.7 billion euros a year earlier.
Renault shares were broadly flat at 1pm London time, down slightly in intraday trading at 42.96 euros.
Supply chain issues
De Meo said he sees continued longevity in the supply and logistical hurdles that have plagued automakers since the start of the Covid-19 pandemic, particularly related to the global shortage of semiconductor chips that lasts for years.
“We believe that, on semiconductors, [it] going to continue to be pretty much a challenge for a few more years, especially on the kind of semiconductors we use in the automotive industry,” De Meo told CNBC, believing that logistical and component hurdles have driven Renault to underproduce by 300,000 cars in 2022.
He predicted similar losses in 2023.
“So it’s going to stay there. But I think we’re a little better prepared. We know how to find the parts and how to organize the production to keep doing that. But we have to recognize that it’s not going to be, again, a normal year,” added De Meo.
Despite these prospects and a “still difficult environment”, Renault is aiming for a group operating margin equal to or greater than 6% in 2022, as well as an operating free cash flow equal to or greater than 2 billion euros.
He also proposed a dividend of 25 euro cents per share for the 2022 financial year – marking the company’s first payment proposal in four years, according to Reuters – which is expected to be paid in May, if approved at the meeting. the company’s annual general meeting the same month.
Correction: De Meo predicted similar production losses in 2023. An earlier version misrepresented the year.
