Renault to separate EV unit in sweeping overhaul

The restructuring, one of the most radical in the French auto maker’s 124-year history, will leave Renault mostly focused on electric vehicles (Photo: Reuters)
The restructuring, one of the most radical in the French auto maker’s 124-year history, will leave Renault mostly focused on electric vehicles (Photo: Reuters)

Summary

French car maker to pair up with China’s Geely in combustion-engine venture

PARIS : Renault SA said it would split itself into several divisions, putting its core business making conventionally powered cars into a joint venture with a Chinese partner and detailing plans for a separate stock-market listing of its electric-vehicle division.

The restructuring, one of the most radical in the French auto maker’s 124-year history, will leave Renault mostly focused on electric vehicles. Executives hope the overhaul will attract investment and give it the wherewithal to tackle the expensive transition away from the internal combustion engine that the entire auto industry is grappling with.

As part of the plan detailed Tuesday, Renault said it is forming a joint venture with China’s Geely Automobile Holdings Ltd. focused on gasoline-powered engines and hybrid technology. It also said it was in talks with longtime alliance partner Nissan Motor Co. about the Japanese company investing in its new EV and software business, though it didn’t provide a time frame for reaching an agreement.

Across the auto industry, executives are restructuring operations that have long been built around the internal combustion engine, putting more emphasis on the development of technologies for electric vehicles—a transition that requires hefty investment.

Renault has gone further than most. As well as carving out units focused on electric cars and combustion and hybrid-engine assets, Renault is also creating divisions to house its Alpine sports brand, its financial-services assets and a new mobility and recycling business. Renault Chief Executive Luca de Meo floated the idea of listing Alpine in the future.

“A series of revolutions is reshaping the auto industry in depth," Mr. de Meo told investors on Tuesday while presenting the company’s new strategy.

Renault said the joint venture with Geely would have 17 so-called powertrain plants, and five research and development centers, and would employ about 19,000 workers. Renault and Geely will each hold a 50% stake in the new company and the JV could welcome new shareholders in the future, the company said.

The new JV will supply both car makers, and may later serve outside customers. Renault said it expects to finalize the agreement with Geely next year.

For Geely, the move continues a pattern of investing outside China. The Chinese auto maker is owned by Zhejiang Geely Holding Group, which also holds Swedish car maker Volvo Car AB.

For Renault, the JV is a central plank of the company’s overhaul, which executives have been working on for months.

However, it remains unclear how Renault’s longtime partner Nissan will fit into the new configuration. Renault has been locked in negotiations with Nissan about the latter investing in Ampere, the new EV division, and said those talks were continuing. The framework being discussed, people familiar with the matter have said, would also see Renault reduce its current 43% stake in Nissan to 15%—a stake sale that its Japanese partner has long requested.

The EV business will be based in France and employ about 10,000 people. Renault aims to take the new company public during the second half of next year if market conditions allow, and intends to keep a majority stake in the business.

A number of people involved in the negotiations between Renault and Nissan said several issues have delayed a deal from being concluded.

One big sticking point is intellectual property that is all or partly owned by Nissan, and how it could be transferred to Renault’s new EV business. Nissan also doesn’t want technology that it developed with Renault to be shared with Geely, The Wall Street Journal has previously reported.

Asked about the discussions over patents on Tuesday, Mr. de Meo said talks would continue in the coming weeks. “It’s a business discussion, right?," he said. “You can pay if needed."

He also added that Renault would be moving ahead with its restructuring, irrespective of what Nissan decides. “It’s important for us even in a marriage to have our own hobbies and our own life," Mr. de Meo said. “My job is to make sure that Renault can walk on its own legs."

Renault also hopes to win the support of other outside investors for Ampere. Those include U.S. chip maker Qualcomm Inc., which said in a joint statement with Renault on Tuesday that it intended to invest in the EV business.

Overall, Renault said the overhaul would boost its financial performance, including doubling its operating margin in the coming years. It is targeting a margin above 8% in 2025 and above 10% by 2030. It also backed this year’s guidance, which includes an operating margin of above 5%.

The French car maker said it planned to reinstate dividends next year, which it paused in 2020 as the pandemic shuttered plants around the world. It said it aims to reach a payout of 35% of its net income in the coming year.

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