In this news, we discuss the Renault’s new boss outlines a slimmer, high-tech future
PARIS (Reuters) – French automaker Renault has pledged to cut costs further and focus on a smaller number of profitable models as its new boss plans to revive a company hammered by management turmoil and COVID-19 crisis.
In his first strategic update since taking office in July, managing director Luca de Meo said he would simplify manufacturing and limit spending in areas such as research, while reducing car production to 3 , 1 million units in 2025, compared to 4 million in 2019.
Focused on efficiency and profitability, Renault’s new plan stands out clearly from the ambitious project planned for four years by the former boss turned fugitive Carlos Ghosn.
Ghosn’s strategy hinged on growing car volumes around the world – a plan critics say forced the automaker to focus on size rather than profit.
“We have grown but not better,” De Meo said in an online presentation Thursday, adding that the task now was to “lead our business from market share to the margin”.
To do this, Renault will build vehicles on fewer shared platforms to cut costs by 600 euros ($ 730) per car by 2023. Half of Renault’s vehicle launches will be electrified versions by 2025, and electric models are expected to have better profit margins than their fossils. – fuel equivalents, the automaker said.
In a note to clients, Jefferies analyst Philippe Houchois called the company’s new profit targets “disappointing”, reflecting “the depth of challenges at Renault”.
Renault plans to reduce the development time of a new vehicle from one year to less than three years and announces the creation of a new business unit, called Mobilize, focused on “new profit pools” resulting from services linked to data, mobility and energy.
De Meo, who previously headed Volkswagen’s Seat brand, aims to get at least 20% of Renault’s revenue from this business by 2030.
“We will go from an automotive company working with technology to a technology company working with cars,” he said.
Renault was struggling to bring down sales even before the COVID-19 crisis and tried to get a partnership with Japanese Nissan back on track.
Renault on Thursday raised its cost savings target from 500 million euros to 2.5 billion euros by 2023, and set itself the objective of gradually increasing its operating margins, to reach 5% of ‘by 2023.
The company also plans to cut capital spending and research costs to 8% of revenue, down from 10% by 2025.
Together, these measures are expected to lower Renault’s breakeven point by 30% by 2023.
Renault has not yet published margins for 2020, although following the COVID-19 pandemic which disrupted operations, they are expected to be lower than the 4.8% reached in 2019.
Renault has said it is targeting automotive free cash flow of € 3 billion by 2023 and € 6 billion by 2025.
“At the margin, commitment to short-term cash flow targets is positive as it remains the primary concern of investors,” Citibank analysts wrote in a client note. “More detailed details on how Renault is moving to a sustainable level are also welcome, as Renault shares continue to trade at a marked discount to their peers.”
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Reporting by Sarah White and Gilles Guillaume; Written by Nick Carey; Editing by Mark Potter
Original © Thomson Reuters