the crisis is over, how Luca de Meo put the diamond back on his feet

“I want you to stop writing that Renault is in danger of disappearing”, launched Luca de Meo during the press briefing for the presentation of half-year results. It must be said that the boss of the French automotive group has just announced the results of excellent quality, at the point of relaunching his stock market action with more than 6% gains in the first exchange after notice. This is a real victory for a company whose stock has been falling steadily for a year, accompanied by a downturn after withdrawing from Russia, Renault’s second market.

Early results

Because even if everything is not rosy in this complex half year for Renault (the withdrawal from Russia cost more than 2 billion euros to the group’s balance sheet, and dropped the net result in the red by 1.36 billion euros), the fact remains that the company has put the main financial indicators in the green. “We’re three years ahead”Luca de Meo was happy.

The operating margin more than doubled, to 4.7% against 2.1% last year, the generation of cash is close to one billion euros, and the debt has decreased significantly to less than 500 million euros.. . All this in a sectoral environment that has never been disgusting: the increase in prices, the decrease in volume, the lack of parts… However, Luca de Meo confirms, Renault has never been efficient inside in ten years.

Despite the chip crisis, Renault is sticking to its strategic roadmap

In fact, the real performance indicators of Renault’s structure have already been published a few weeks ago, on the occasion of the commercial results. On July 12, the diamond brand announced that it has improved the main commercial weaknesses that led to the disaster three years ago. First, Renault balances its sales to individuals, the most profitable. With 53% of sales, they increased by 13 points in half a year. This performance makes it possible to reconnect the virtuous circle of increasing residual value (the sale price), which is another black spot for the group. In addition, Renault regained control of electrification after becoming the leader, and becoming obsolete, the diamond brand is once again in the spotlight of high-performance products: E-Tech technology or the new Mégane electricity, praised by the press and whose beginning seems promising.

Great expectations in Austral

But it’s the performance of the compact side that pleases Luca de Meo. This is one of the shortcomings that jumped out at him when he took the helm of the group in July 2020. Within half a year, the share of sales allocated to this segment increased by a third, almost to 32%, of the total.. This the Arkana that boosts sales. But Renault expects a lot from the Austral, which goes on sale at the end of the year. For Luca de Meo, this compact SUV should make people forget the failure of the Kadjar by significantly improving unit revenue with an average transaction price of 25% higher and a double margin. “Austral has the best hybrid engine in the world with an efficiency of 44%, and emits 15 grams less CO2 than the best product in the segment”assured Luca de Meo who thought he had a real trade war machine there.

Renault presents an ambitious “made in France” electric motor strategy

This performance is not limited to the Renault perimeter only because Dacia and Alpine are also part of this dynamic. The Romanian brand’s low prices saw its sales explode in the quarter, to the point of approaching a 5% share of the European market. Its new Jogger, its 5 to 7-seater SUV has sold 50,000 units, double the initial goal. For Dacia, it’s a way of capturing price ranges where it doesn’t exist. In addition, the brand completely avoids the inflationary pitfall, by passing on almost all additional costs to prices. Therefore, consumers are not discouraged. For its part, Alpine finally woke up thanks to the creation of a Formula 1 team in its name, which gave it new visibility.

More profit is in sight

For Luca de Meo, the group is currently sitting on new performance drivers that have not yet been finalized to be seen in the financial accounts. By resting its legitimacy on the above parts, Renault can hope for more profit when its product plan has reached cruising speed… Because for now, the range change is still in its childhood. Austral, if successful, will support the group from 2023. The new R5 scheduled for 2023 also promises to strengthen the diamond brand in the dynamic segment of electric cars. In 2024, it will be the turn of a completely redesigned Scénic (and above all will be an SUV) to boost sales and profits. Dacia is also on the eve of a more ambitious product plan with the arrival of a new Duster, the cash machine of the brand, next year, but also the Bigster, to reach the top of the segment. Finally, everyone is waiting for the rest of Alpine with an SUV …

In less than three years, Luca de Meo has completely transformed a Renault that previously focused on volumes and the city car segment (Clio, Captur), towards a group obsessed with creating value even if it means sacrificing volumes. Therefore, the effect of price, ie the share of sales that only increases through price and not the volume of sales, increased again by 7 points in half a year, after an increase of 9 points in 2021. However, contrary to what one might think, Renault also benefits from the economic situation because in a market that does not deliver demand, the French group is able to choose the models to sell, and above all not to give any discount sales. The real test for Renault’s pricing power will therefore come in 2023 when the shortage of semiconductors will disappear, and the consumer will finally have a choice.