Renault Bets Future on New Models, Global Growth; Sticking to EV Plan

PARIS – The terrible economic conditions in Europe robbed Renault’s automotive business of the chance to earn a profit in 2012, but a 9.1% increase in sales outside Europe held losses to €25 million ($33 million).

And thanks to income from its banking business, Nissan, AvtoVAZ and the sale of its AB Volvo stake, the Renault group ended up earning €1.8 billion ($2.4 billion) overall.

The launch of the Clio IV in late 2012 ended four years of core-product drought, and CEO Carlos Ghosn says 95,000 of the cars already have been ordered. More new vehicles are coming this year to Europe, which should increase Renault’s volume, unless the market declines catastrophically, he says.

Last year, Renault vehicle sales fell 19.1% in a European market that was down 8.1%.

Europe is critical to Renault. Although more than 50% of its 2012 volume was outside of the region, that has as much to do with falling European sales as rising demand elsewhere.

Renault anticipates deliveries in Europe will decline again this year “at least 3%,” and Ghosn admits to some concerns after watching French sales plummet 14% in January.

“We didn’t expect that,” he says. “It is logical to say the first half will be worse than the second half. Our volumes will grow because of the new products, but by how much depends on the market. A 1% or 2% change in Europe will have a big effect on the total.”

New Renault models coming this year include the Captur small cross/utility vehicle, Clio RS and Clio station wagon, Scenic X-Mod (a CUV-like Scenic), Zoe electric and new Dacia Logan, Sandero Stepway and Logan MCV van.

In subsequent years, Renault will replace the Espace, Laguna and Megane on a new platform being developed with Nissan called CMF1. Those cars likely will be made in France, as they are high-margin vehicles.

Renault’s renewed focus on new-product introductions has not diluted its international ambitions. Brazil, Argentina and Russia now are in the top five Renault markets. Renault is the only global auto maker without production in China, but it has applied for a joint venture factory with Dongfeng, Nissan’s partner, and it hopes to get approval this year.

Ghosn believes Renault’s electric-car orientation will help it in China, because the government there is anxious to develop an EV culture.

Renault is like other auto makers in many areas, Ghosn says, but it has three unique features: A successful alliance with Nissan, pioneering support of EVs and a successful entry-level range of cars from its Dacia subsidiary.

Ghosn admits to disappointment over EV sales so far.

“But it is not a passive disappointment,” he says. “We continue lobbying, and it doesn’t change our idea that electric cars will be an important part of the automobile market.”

Sales rose slowly for hybrids in the beginning, he notes, and Smart and BMW are launching electric cars this year, which could help heighten interest. So far EV demand is increasing at the same pace that it did for hybrids he says, adding that is a satisfactory pace.

Ghosn is sticking to his goal of EVs accounting for 10% of sales in 2020 in areas where they are offered.

Renault also is working to develop a “sub-entry level” range of cars for India and other emerging markets.

In France, where it sells 22% of its cars, Renault has suffered negative publicity for reducing production. Ghosn defends the auto maker’s record, pointing out that many engines made in France are exported to Nissan and that Renault’s efforts to renegotiate contracts with workers in French factories could lead to bringing manufacturing projects here involving other auto makers.

“More than two projects are under study, with more than one partner,” Ghosn says. Whether any program arrives depends on the results of the negotiations and the other auto makers’ decisions.

On the financial side, Ghosn says Renault has made positive cash flow its target for the automobile business, because it thinks that will boost interest from investors. Today, he says, Renault has a negative value, if its holdings in other companies are subtracted.

Ghosn says Renault is focused on coming out of the recession strong over the next four years, not in 2020 or 2025.