Renault is looking at creating separate divisions for electric and combustion engine cars, an idea other automakers have resisted in case it weakens their ability to use profits from polluting vehicles to fund a cleaner future. The French automaker announced its “strategic studies" on Friday as it reported an annual profit for the first time in three years and said its turnaround plan was ahead of schedule.
With its finances on a surer footing, the company is now accelerating efforts to catch up with the likes of Tesla and Volkswagen, whose share prices have soared as they take a lead in the switch to electric vehicles.
In a presentation to investors, Renault said a “pure electric entity" could be focused on France and be open to partnerships, while a separate one for combustion engine and hybrid cars could be focused outside France and do the same.
Spain is Renault’s main hub for hybrid powertrain production. The company sources combustion engines from Romania, Turkey and South Korea.
The growing preference among investment managers for companies focused on low-carbon technology has helped Tesla become the world’s highest-valued automaker, and led some investors and analysts to urge other carmakers to consider separating their combustion engine and electric businesses.
However, companies such as General Motors have resisted those calls, arguing profits from petrol and diesel vehicles will fund the transition to electric ones.
European governments are pushing automakers to phase out combustion engines, and the Renault car brand has said it is aiming to be all-electric in Europe by 2030. But other markets, including Latin America, Southeast Asia and Eastern Europe, are expected to continue using petrol and diesel for longer.
‘RENAULUTION’
Renault also said its finance chief of six years, Clotilde Delbos, would move to lead its Mobilize business full time.
The business, which covers areas such as car sharing and data management, is part of its strategy to achieve carbon neutrality in Europe by 2040.
Delbos will continue as deputy to CEO Luca de Meo and be succeeded as finance chief by her current second-in-command deputy, Thierry Pieton.
De Meo is leading a wide-ranging restructuring effort under the name “Renaulution" aiming to cut costs and emphasize value over sales volume.
Rocked by the 2018 arrest of Carlos Ghosn, the architect of its alliance with Japan’s Nissan, Renault was then hit hard by the COVID-19 pandemic.
But now de Meo’s efforts are bearing fruit,
Last month, Renault and Nissan said they would work more closely together on electric vehicles, as they detailed a five-year, $26 billion investment plan.
Sources familiar with the matter told Reuters that Nissan and other alliance partner Mitsubishi Motors were only recently informed that Renault might move its internal combustion engine and hybrid operations into a separate entity.
But they said in almost identical emailed statements to Reuters that they “believe this step to be a preparation for the next stages of the Renaulution plan," adding they would “continue to collaborate as an alliance partner."
Asked whether the plan might change the alliance structure, de Meo said: “It’s a project that on paper we are capable to do on our own, we don’t need anyone to do it, but obviously we will leave the door open to our partners in case they are interested in making the company’s structure evolve."
BACK IN THE BLACK
Renault reported a bigger than expected net profit of 888 million euros ($1.0 billion) for 2021, and an operating margin of 3.6%. The “Renaulution" plan had aimed for a margin of above 3% in 2023.
The company cut fixed costs by 2 billion euros between 2019 and 2021, one year ahead of plan.
Helped by the improved finances, Renault said it aimed to repay the 4 billion euros of state aid it received during the pandemic by the end of 2023, ahead of the 2024 deadline.
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It did not propose a dividend for 2021, while it prioritises the turnaround plan and repaying the state loan.
Renault’s shares were up 0.8% at 1420 GMT, after spiking 4.8% in earlier trade.
For this year, the company is targeting an operating margin of more than 4%, and an automotive operational free cash flow of at least 1 billion euros.
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