“Revolution” at Renault, which will separate and list its electric cars on the stock exchange

Renault factory, Cléon, Seine-Maritime, July 5, 2022 (Lou BENOIST / AFP)

French carmaker Renault, like other automakers that need billions of euros in financing for the electric transition Europe wants over the next decade, unveiled a sweeping reorganization on Tuesday in a bid to lure investors to electrics.

The group announced during an investor day in Paris that its new subsidiary Ampere – without emphasis – will employ 10,000 workers in France to produce one million electric cars under the Renault brand by 2031.

Ampere will produce the new Renault 5 and Renault 4, especially in Hauts-de-France.

This subsidiary wants to be as bright as Tesla: it aims for annual growth of more than 30% in the next eight years and a financial balance in 2025.

America’s Ford also announced the creation of an electric subsidiary called the Model E, while Germany’s Volkswagen floated its Porsche brand to finance electrification.

But Renault wants to play both the electric future and the sustainability of heat engines outside the European Union, the most ambitious climate zone and the only new cars allowed to be sold in 2035 that must not emit any greenhouse gases.

Financing of electricity

The French car manufacturer Renault presents its future activities on November 8, 2022
French carmaker Renault presents its future activities on November 8, 2022 (Lou BENOIST / AFP/Archives)

Therefore, Renault will join forces 50/50 with the Chinese giant Geely, which already owns Volvo Cars, in a new subsidiary called Horse, which will produce engines, gearboxes and hybridization systems for thermal cars (gasoline and diesel) and hybrids. .

This Franco-Chinese team will have 19,000 employees with 17 factories and five R&D centers in Europe (Spain, Romania and Sweden), China and South America. Its turnover, estimated at more than 15 billion euros, should increase by 4% by 2027.

A new entity “Power” (power) will combine all the thermal and hybrid activities of Losange: the “At” subsidiary, as well as non-electric cars of the Renault brand, its utilities and Dacia.

This new part of the strategic plan, called “Revolution”, should bring Renault to a group-wide operating margin of more than 8% in 2025 and 10% in 2030.

Renault must be a “counter-cyclical company” as it aims to “push metal” under Carlos Ghosn, Renault CEO Luca de Meo has launched.

The group intends to list Ampere on the Paris Stock Exchange “in the second half of 2023 at the earliest”, thus retaining a “strong majority” in the subsidiary, while financing its expensive electric transformation thanks to a contribution of fresh capital.

Valuations of traditional car groups pale in comparison to those of new companies specializing in electric vehicles, such as Elon Musk’s American Tesla or China’s BYD. Separation of electricity activities helps attract investors with higher expected rates of return.

American chipmaker Qualcomm, Renault’s supplier, has already identified itself as a shareholder in Ampere.

At the opening of the Paris Stock Exchange, Renault’s share fell to 31 euros before recovering at around 11 am.

What about Nissan?

A big question remains unanswered: Renault, which the French state and Nissan each own 15%, has yet to determine the stake its Japanese partner will take in the new electric subsidiary.

The restructuring actually comes ahead of an overhaul of the Renault-Nissan-Mitsubishi alliance, ahead of a reduction in Renault’s stake in Nissan capital, which should be finalized “in the coming weeks”, Mr De Meo stressed.

Renault, whose finances remain fragile, intends to resume dividends in 2023, having not paid them since 2019.

It aims to increase employee ownership to 10% of equity in 2030, up from 3% currently.

RBC analyst Tom Narayan comments that these financial targets are “more ambitious than expected” but “raise questions”. “Given that these entities share operations, how will Ampere separate from power?”

The alpine sports brand will also grow by opening up to investors and expanding into North America and China in particular.

The group also announced that it is strengthening its partnership with Google for a new infotainment system from 2026.

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