The market is wondering if five Renaults are better than one

By Gilles Guillaume

PARIS (Reuters) – Financial analysts who consider Renault’s structure and strategy too complex are on their side: instead of a single diamond group, they will have five, corresponding to the specialized and autonomous entities announced by Chief Executive Luc de Meo. Tuesday, Capital market day.

“The separation of heat/power operations is important for the investment scenario, but the separation into five different divisions, each with its own income statement, multiple alliances and minority interests, creates unnecessary complexity in terms of management and valuation,” commented Philippe Houchois. , an analyst at Jefferies, in a note published late Tuesday.

Renault shares continued to fall on Wednesday (-4% after -3.5% the day before), with the market lamenting the lack of details on the Nissan component.

The diamond group, created 124 years ago, will be divided into groups such as “Power” (historical performance of thermal and hybrid cars), “Ampere” (for electric cars), “Alp” (for sports), “Mobility” in the future. ” (new forms of mobility and financing) and “Future neutral” (circular economy). To this portfolio will be added a joint venture with China’s Geely for thermal and hybrid engines and transmissions.

“It may seem more complicated, but with tight teams we get better efficiency and therefore less complexity,” said a source familiar with the matter. “Furthermore, the group now operates with a lean structure.”

Renault, an electric pioneer with Nissan in the previous decade, found itself supplanted by newcomers like Tesla or the ambitions of bigger or more profitable rivals like Volkswagen and Stellantis.

Renault had to be inventive when it turned a profit last year after two years of losses to stay in the electrification race, which requires huge investments from automakers.

On Tuesday, CFO Thierry Piéton insisted on the unprecedented nature of the new structure. “The evolution of our portfolio is a complete game changer,” he said.


Each of the five mini-Renaults will publish its results until 2024, giving a better view of the performance of each enterprise.

With the manufacturer’s historical foundations, Power’s performance will remain the mainstay of the group’s cash generation for years to come, supported by Mobilize’s strong profitability.

The younger businesses of Ampère, Alpine and Future Neutral will gradually take over with double-digit operating margins for each of these three businesses by 2030. The electrical division should cease to operate by 2025.

However, management will need to ensure that the new organization does not re-create the duplicates it struggled to eliminate during a drastic restructuring at the end of 2020.

“Operationally, where will the cross-functional business sit in the new Renault5?” asks Romain Gillet, automotive analyst at S&P Global, whose final breakdown is not yet clear.

“The engineering department is there to coordinate all of the above,” replies the source.

In line with Luca de Meo’s horizontal strategy to respond in time to the new technological challenges of the car, the five autonomous entities with their own CEOs will also be able to establish better partnerships.

“The real theme today is creating new technologies. If I decide to do something alone with engineers in a garage in Guyancourt in terms of semiconductors or centralized electronic architecture, I will have a better chance to learn and do more powerful things. If I do it with Qualcomm,” he said.

The American semiconductor giant announced an enhanced partnership with Renault a day ago and could take a small stake in the Ampere division, according to Luca de Meo.

“Take the history of the smartphone and look at what happened, history repeats itself, so we didn’t want to be the victims, to be the ones who wanted to do everything vertically, so there is the idea that the models are open horizontally. It seems to us to be the solution to success,” – with Google on Tuesday Frederic Vincent, Renault’s director of information systems and technologies, emphasized at the organized digital conference.

Renault’s other partner, the American giant, announced on Tuesday to strengthen cooperation with the French manufacturer in the design of future cars.

“Collaboration is faster, cheaper and global,” said Gilles Le Borgne, director of engineering at CMD.

(Gilles Guillaume with Nick Carey in London, Editing by Jean-Stéphane Brosse)

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