Paris: Renault SA will double electric car offerings in the next five years and widen its presence in China to protect its global ranking in building battery-powered autos as competitors including Volkswagen AG expand in the segment.
Electrified models will comprise half of Renault’s line-up by the end of 2022 as the carmaker rolls out eight new or revamped wholly battery-powered autos and adds 12 hybrid vehicles, chief executive officer Carlos Ghosn said Friday in Paris at a presentation of the new business strategy, dubbed Drive the Future.
“We intend to remain the leading provider of mass-market electric vehicles," Ghosn said. Battery-powered autos are “turning into a significant contributor to our performance," and “our vision is obviously now a profitable core business" with the models.
Renault and long-time Japanese partner Nissan Motor Co. are under pressure to defend an early advantage in electric cars as Tesla Inc. rolls out the lower priced Model 3 sedan and Volkswagen plans a €20 billion ($23.4 billion) push into making electric cars for the masses. While the Renault-Nissan alliance sold the most battery-powered vehicles in the industry to date, the advantage has amounted to little amid tepid consumer demand.
The French company plans about 40% growth in annual sales and deliveries by 2022, with revenue exceeding €70 billion and volume totaling 5 million vehicles, as it seeks more customers in China, Brazil, Russia and Iran. Operating profit will amount to more than 7% of revenue as manufacturing-efficiency measures generate savings of €4.2 billion, and regions outside Europe will account for more earnings, according to an online presentation. The company will invest €18 billion in new technology, including developing 15 models with autonomous features.
Renault’s plan “relies on everything coming from emerging markets," analysts at Sanford C. Bernstein & Co., including Max Warburton, wrote in a report to clients. “Renault has a good track record in such markets and may well succeed further," though much of the performance will hinge on the countries’ economies rather than the company’s own efforts.
Renault shares rose 1.4% to €86.83 of 12:44pm in Paris. The stock, trading at the highest price since May, has gained 2.8% this year, valuing the company at €25.7 billion.
The business plan “is good news in a world where most people fear earnings, cash flow and profitability will fall due to disruption" from battery-powered and driverless systems, analysts at Evercore ISI, including Arndt Ellinghorst in London, said in a report to clients.
The automaker, based in the Paris suburb of Boulogne-Billancourt, is building on a joint strategy outlined three weeks ago with Nissan and new partner Mitsubishi Motors Corp. to bring out 12 purely electric vehicles by 2022 as well as at least one fully automated model. Nissan will unveil details of its business plan on 16 October, and Tokyo-based Mitsubishi Motors will release its program two days later. Ghosn is also chairman of the two Japanese manufacturers.
Renault’s savings goal compares with €3.2 billion in spending reductions in its previous business program, Ghosn said Friday. The carmaker pledged to maintain the margin at or above 5% during the planning period. Even so, it faces roadblocks, including price pressure in some markets as customers resist the cost of new technology.
The industry shift to battery-powered cars is being pushed by increased regulatory scrutiny following Volkswagen’s diesel-emissions scandal and government efforts to reduce air pollution by phasing out combustion engines. While Yokohama-based Nissan and Renault together lead the battery-powered segment with their respective Leaf and Zoe cars, electric vehicles have yet to win over many buyers because of limited ranges and higher prices. Renault’s current line-up also includes electric versions of its conventionally powered Fluence sedan, and Master and Kangoo vans.
Even with developments hinging more on regulators than on consumer demand, “we are ready to face an upsurge of EVs in the next five to six years," Ghosn said. Customers are shifting away from diesel models because they fear “they are going to be massacred" with the used-car value when they decide to sell their vehicle. “How much EVs will be bought, honestly, it is impossible to predict today," though the technology “is going to be mainstream in China," he said. Bloomberg