The diamond brand has announced that it is diversifying its strategy. By creating multiple subsidiaries, it hopes to return to double-digit growth.
Renault announced on Tuesday that it intends to accelerate its operating margin in the coming years thanks to a strategy that separates electrical and thermal energy and goes through several partnerships to compensate for limited capital.
The diamond group, which has not yet reached an agreement with its partner Nissan on the delicate issue of technology sharing, expects to achieve an operating margin of over 8% in 2025 and over 10% in 2030, against 3.6% in 2021 and at least 5% expected this year. The French automaker will create an electrical entity, Ampère, in which a stake in Nissan’s capital is still “under study”, and an equipment manufacturer specializing in thermal engines, owned 50-50 with China’s Geely.
Goal: one million electric vehicles by 2031
Forerunner of the battery-powered car with Nissan, Renault has been supplanted by newcomers like Tesla. He would like to return to the battle thanks to this new electric entity Ampère, defined as the “first pure electric and software player born from the rupture of a traditional car manufacturer”. This activity, of which it will hold a large majority, will produce around one million electric vehicles for the diamond brand in 2031, will be listed on the stock exchange after the summer of 2023 at the earliest, and will welcome potential strategic investors. In addition to Nissan, Renault cited Qualcomm Technologies, one of two tech giants – the other being Google – with which it has forged deep partnerships to stay in the R&D race in vehicle electronics architecture.
The Renegotiation Plan
“The Renautution plan is self-funding, but will be accelerated through external funding and partnerships to enable access to key value chains, drive growth and innovation, while reducing the need for capital,” said CFO Thierry Pieton. Renault shares fell 1.78% to 31.14 euros on the Paris Stock Exchange, with analysts noting the lack of precision in discussions with Nissan over the alliance’s future.
Renault more fragile than its competitors
According to people familiar with the negotiations, the two groups agreed on a November 15 date to reach an agreement. In the electrification race in which the automotive industry is engaged, Renault remains in a more fragile situation than many of its competitors. The group, which returned last year with a profit after two years of loss, still shows, for example, a profitability well below the double-digit margin of Stellantis. And the 26 billion euro investment plan of the alliance with Nissan and Mitsubishi, which is also at a crossroads as “structural improvements” are still under study, is less than half of Volkswagen’s. “We intend to position ourselves faster and stronger than the competition in the new automotive value chains: electric vehicle, software, new mobility and circular economy”, added the general manager Luca de Meo in a statement.
Although its forced exit from the Russian market came after the end of the geographic expansion of the Carlos Ghosn years, Renault hopes to double its size and market coverage thanks to the creation of internal combustion engine supplier Horse, which already has eight customers, including the group’s brands. By combining its gasoline and hybrid technologies with those of Geely, Renault is targeting turnover of more than €15 billion for the new entity with new access to North America and China.
In addition to Ampere and the Power entity in thermal and hybrid vehicles, Renault will have three other business areas: Alpine, its motorsport brand, Mobilize, in financial services, and a final division dedicated to new mobility and recycling. “We are creating independent companies, focused on structurally more profitable activities, open to foreign investment, each one of them revolving around a set of clean technologies”, said Luca De Meo.
After three years without dividends, Renault also plans to resume payment to shareholders next year.