Renault is reorganizing itself for its transition to the electric car

It has become an irritating habit that Renault investors have learned to deal with: learning from the press rather than management about the group’s major strategic shifts. The announcement this Tuesday, November 8th of the third and final leg of its grand “Renaulution” presented in Fall 2020 is no exception.

After weeks of rumours, the group’s managing director, Luca de Meo, confirmed the French automaker’s reorganization with the creation of two major new subsidiaries, one for electrical, called Ampere, which is due to be introduced on the Exchange in 2023, and the other dedicated to thermal engines called Power, in which the Chinese Geely will hold 50% of the shares.

Release of funds to finance vehicle electrification

Since the Ghosn affair in 2018, the capitalization of the former Régie Nationale has been divided by five to reach less than 10 billion euros (compared to the 44 billion of its competitor Stellantis, born from the merger of PSA and Fiat-Chrysler), barely more than its stake in Nissan (6 billion). And that’s despite its return to green in 2021.

With the IPO of Ampere and the entry of new investors in the capital, the objective pursued by Renault becomes clear: freeing up funds to finance the costly transition to electricity. Today, electrical activities represent a lot of investment and few sales for manufacturers. By separating this activity from the rest of the group, Renault hopes to give investors more visibility on the margins and prospects of this market, something similar to what Ford has just done.separating thermal and electrical activities”, explains Valentin Mory to the analysis firm AlphaValue.

In detail, Ampere will bring together all the electrical activities of the group with 10,000 employees, including a large part in France. The objectives presented by Renault are proactive. Over the next eight years, Ampere is targeting annual growth of more than 30%, with a margin of 10% in 2030, compared to 4.7% currently for the group as a whole. According to Bloomberg, Renault, which is expected to remain the majority overall, expects to value its new electric subsidiary on the stock market at around €10 billion, more than its current capitalization.

dismantling fears

To recover the money, the diamond brand is also counting on the sale of part of its historic activities to the Chinese manufacturer Geely, which already owns Volvo. So far, no amount has leaked, but Renault assures us: the prospects for this market are still flourishing, with thermal cars still expected to represent 50% of the market in 2040, outside the European Union.

Basically, Renault’s strategy is quite simple: it involves selling what is profitable today to finance what will be tomorrow, hoping in the process to be able to count on some investments from its Chinese partner, namely in fuels. of synthesis”, specifies Valentin Mory.

According to rumors, discussions are also underway with the oil giant Saudi Aramco, the armed wing of the Saudi kingdom, which may enter the capital of Power in a second phase. In this case, Renault would only be a reference shareholder, a minority within this group, which should have 19,000 employees in Europe, China and South America. That this time please the unions, which for weeks have been warning the French state (which owns 15% of Renault) about the risk of dismantling the group.

The big unknown: Nissan’s future

At the moment, in any case, investors are struggling to buy the financial prospects of this great revolution. Throughout the 8th of November, the share price continued to fall, around 2%. In addition to Ampere’s somewhat disproportionate ambitions, there is a great absence of this great Meccano: Nissan, Renault’s historic partner, whose role it will play in the future electric subsidiary is not known, regrets Bernard Jullien, from the Feria study company. It’s a bit like asking the markets to buy a story without its main character. »

Taking advantage of the reorganization of its partner, Nissan asked Renault to rebalance the weight of its cross-shareholdings in the alliance (Renault holds 43.4% of Nissan and Nissan 15% of Renault, without voting rights). But for now, discussions still seem stalled, causing some to fear a decline in the historic alliance.

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Thermal car ban in 2035: a worrying deadline

The European Union endorsed on 27 October the end of the marketing of new vehicles with combustion engines from 1er January 2035.

However, exceptions may be granted, should alternative technologies emerge, such as synthetic fuels or rechargeable hybrid engines, ensuring the goal of completely eliminating greenhouse gas emissions from vehicles. A review clause is also planned for this purpose in 2026.

Last week, the European Commissioner for the Internal Market, Thierry Breton, expressed concern about this deadline, even encouraging manufacturers to continue producing thermal cars after 2035 in order to be able to sell them outside Europe.

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