Renault’s new CEO lays out a plan to weather the storm

By Rahul Vaimal, Associate Editor
Renault Image
Representational Image

French carmaker Renault pledged more cost cuts and to focus on a smaller number of profitable models as its new boss laid out plans to revive a business affected by management turmoil and the COVID-19 crisis.

In his first strategy update since taking over in July last year, Chief Executive Luca de Meo said he would simplify manufacturing and limit spending in areas like research, while cutting car production to 3.1 million units in 2025, from 4 million in 2019.

Focused on efficiency and profitability, Renault’s new plan is a marked departure from the ambitious one laid out four years by former boss Carlos Ghosn. Mr. Ghosn’s strategy was built on growing car volumes globally, a plan critics say forced the carmaker to pursue size over profits.

“We grew bigger but not better,” Mr. De Meo said during an online presentation, adding that the task now was to “steer our business from market share to margin.”

To do that, Renault will build vehicles on fewer shared platforms to cut back costs by 600 $730 per car by 2023. Half of Renault’s vehicle launches will be electrified versions by 2025, and electric models should have better profit margins than their fossil-fuel equivalents, the carmaker said.

Renault plans to cut development time for a new vehicle by a year, to under three years and announced a new business unit, called Mobilize, focused on “new profit pools” from data, mobility and energy-related services. Mr. De Meo, who previously ran Volkswagen’s Seat brand, aims to derive at least 20 percent of Renault’s revenue from that business by 2030. “We’ll move from a car company working with tech to a tech company working with cars,” he said.

Renault was struggling with waning sales even before the COVID-19 crisis and has been trying to get a partnership with Japan’s Nissan back on track. The company plans to lower capital spending and research costs to 8 percent of revenue from 10 percent by 2025. These measures should lower Renault’s break-even point by 30 percent by 2023.

Renault has yet to publish margins for 2020, though following the COVID-19 pandemic which disrupted operations, they are likely to be lower than the 4.8 percent hit in 2019.

YOU MAY LIKE