Renault CEO Luca de Meo on Thursday questioned the wisdom of price cuts rivals have been implementing in a bid to bolster market share for his or her electric vehicle fleets.
“We have seen competitors moving prices up and down, etc., etc. that is their decision. But I do not think it’s a really healthy practice in the long run,” he told CNBC.
“As electric cars are ramping up in Europe, we want to have a healthy business, and so, within the case of Renault, the very last thing I will do is to compromise on the margins, you recognize, of electrical cars.”
De Meo’s comments follow a string of aggressive price drops announced by automakers Tesla and Ford amid pressure to stay competitive in a burgeoning EV market.
Tesla threw down the gauntlet with its mid-January announcement of price reductions for U.S.-marketed models across the board and for its Model 3 and Model Y inside Europe. Ford followed on Jan. 30 with price trims for its electric Mustang Mach-E crossover.
Nevertheless, De Meo signaled that sales price volatility could erode consumer confidence in EV products.
“Our priority will likely be to defend the worth for the client,” he said. “Because those sorts of swings are form of value destroying for the client, take into consideration residual value, etc.”
Renault’s long-term allies are joining the French automaker’s EV push, with Nissan earlier this month pledging to purchase a stake of as much as 15% in Renault’s electric unit Ampere as a part of a broader overhaul of the businesses’ 24-year union. Under the reshaped, previously lopsided alliance, Renault will reduce its shareholdings in Nissan from roughly 43% to fifteen%.
“My job is to make the Ampere case so interesting for them [Nissan and junior alliance partner Mitsubishi] that they are going to determine of their capital allocation meetings to place money there and never in another project,” he told CNBC, adding that the investment was not a condition of the restructure.
Renault Scénic Vision concept automobile at Brussels Expo on January 13, 2023 in Brussels, Belgium. The Scénic Vision has an electrical motor powered by a 40 kWh lithium-ion battery, that will be recharged by a 15 kW hydrogen fuel cell.
Sjoerd Van Der Wal | Getty Images News | Getty Images
Earlier on Thursday, Renault reported that its group operating margin doubled to five.6% in 2022 from 2.8% a 12 months prior, whilst net income swung to a 700 million euro ($748 million) loss. It got here after the corporate in May wrote off a 2.3 billion euro impairment linked to exiting its Russian positions.
Renault posted record money flow of two.1 billion euros last 12 months, compared with its guidance of above 1.5 billion euros. Net income from continuing operations increased to 1.6 billion euros, from 549 million euros in 2021, while group revenues inched as much as 46.4 billion euros in 2022, from 41.7 billion euros a 12 months prior.
Renault shares were largely regular at 1 p.m. London time, down modestly in intraday trade at 42.96 euros.
Supply chain issues
De Meo said he sees ongoing longevity in the provision and logistical obstacles which have plagued automakers because the onset of the Covid-19 pandemic, especially linked to the yearslong global shortage of semiconductor chips.
“We predict that, on the semiconductors, [it] goes to proceed to be just about of a challenge for an additional couple of years, especially on the form of semiconductors that we use within the automotive industry,” De Meo told CNBC, estimating that logistical and component hurdles led Renault to underproduce by 300,000 cars in 2022.
He forecast similar losses in 2023.
“So it will stay there. But I feel we’re a bit of bit more prepared. We all know the way to find the parts and the way to organize production to maintain doing it. But now we have to acknowledge that this isn’t going to be, again, a standard 12 months,” De Meo added.
Despite this outlook and a “still difficult environment,” Renault targets a bunch operating margin at or above 6% in 2022, together with operational free money flow at or above 2 billion euros.
It also recommend a dividend of 25 euro cents per share for fiscal 2022 — marking the corporate’s first payout proposal in 4 years, in keeping with Reuters — because of be paid in May, if approved throughout the company’s annual general meeting in the identical month.
Correction: De Meo forecast similar production losses in 2023. An earlier version misstated the 12 months.
