What’s yours called? The R5 could be in for a reprise as an EV
Renault’s leadership team took to the stage last week to present the brand’s bold new business plan, dubbed ‘Renaulution’. The new strategy is built around the understanding that the company will now chase value rather than volume, aiming to make more profit from each sale rather than simply push for as many sales as possible.
Underlining this is the directive to ‘rightsize’ the company’s production footprint from four million units in 2019 to 3.1 million units by 2025. This will mean removing some of the excess capacity that afflicts Renault’s network and will likely lead to some factory closures and redundancies for a proportion of its workforce. Trimming production down will help cut infrastructure costs and give the group greater agility when adjusting production in the future.
There will also be rationalisation within the products that Renault makes. It plans to cut the number of platforms used across the group from six currently to three, allowing those platforms to work across more vehicle types. In addition, it will also cut the number of combustion powertrains from eight different types to four as it prepares to transition to electrified versions in the future. Again, cutting the variety of platforms and engines it makes will reduce costs, increasing profitability.
With a renewed focus on profitability, Renault will also adjust its international operations to prioritise higher margin business. It highlighted operations in Latin America, India and South Korea as areas of interest, while also wishing to build on its business in Spain, Morocco, Turkey, Romania and Russia – the latter two countries are home to the group’s budget brands Dacia and Lada respectively, with more collaboration expected between the two.
Renault also noted that it had made strong investments in future technology over the last few years that represented an outsize proportion of its costs. With those investments now made, it can begin to scale back R&D as a proportion of revenue from its current 11% ratio to a target of 8% but 2025. Furthermore, it is targeting a reduction in costs of EUR600 per vehicle made by 2023, leading to an overall reduction in group costs by EUR2.5bn by 2023 and EUR3bn by 2025.
Reducing costs will be the “main lever” for Renault to increase profitability over the next five years. For 2023, the group is targeting an operating margin of 3% with operational free cash flow of EUR3bn. By 2025, operating margin is hoped to grow to 5% with EUR6bn of free cash flow. Renault’s leadership stressed that the plan was realistic, with baseline assumptions treated as a floor to grow from, rather than stretch goals – CEO Luca de Meo stated he wanted the group to “underpromise and overdeliver” on its targets. If successful, the plan will reduce Renault’s break-even point by 30% in 2023.
The CEO’s of Renault’s Alliance partners Nissan and Mitsubishi also made an appearance by video to the conference. The strength of the Alliance has been rocked in recent years by the dramatic ousting of former chairman Carlos Ghosn, but all three CEOs presented a unified front today. While de Meo highlighted the need for each partner to focus on its individual strengths, he also noted that they planned to build on the Alliance to leverage the strengths it brings for each member.
New vehicles and business models
Renault set out a four-part strategy for individual business units as part of the Renaulution. Again, with the focus on profitability rather than absolute market share, and a new level of importance placed on rationalisation across brands and making use of the assets already at its disposal such as its existing strength in electrified vehicles.
For Renault, it aims to become a leader in electrification and will adjust its model mixture to launch an ‘offensive’ on the C-segment. It plans 24 new product launches by 2025, with 10 of them being pure EVs and half of them selling within the C and D segment fields. If successful, the group is targeting 45% of Renault brand sales will come from higher margin C and D segment cars in Europe by 2025. In Europe and Britain in particular, Renault has struggled to sell larger D segment cars in the past so time will tell if this new focus on electrification is enough of a USP to draw buyers from rivals.
Parked on stage during the presentation was one such Renault concept designed to capture the imagination of future buyers – the retro-inspired Renault 5 EV. This compact B-segment model echoes one of the brand’s most iconic cars but features truly modern electric underpinnings, and aims to trade on the same nostalgic sentiment as the Ford Bronco or Fiat 500.
Renault-branded models could also get hydrogen fuel cell technology in the future as a range extender for electric vehicles. It agreed to a joint venture yesterday with the US’ Plug Power to work on hydrogen-powered vehicles and has highlighted the benefits of generating hydrogen fuel in France by taking advantage of the country’s particularly clean electricity grid.
Simultaneously, Renault will use its in-house Software Republique department to help it transition from a vehicle brand to a tech-led entity. This will lead to it developing its capabilities in big data and cybersecurity to underpin mobility services of the future. It will also lean into its green credentials through its work recycling vehicles as part of the circular economy – this will become ever more important as more battery electric vehicles are built. Renault’s ‘ReFactory’ in Flins, France is already at work giving second lives to battery packs from electric vehicles by turning them into static energy storage systems.
With the Renault brand pushing further upmarket, this leaves more space for Renault’s budget brands Dacia and Lada to mark out their own identities. The new strategy will see the two move to one shared modular platform from four currently, and drop from 18 bodystyles to 11. The aim by 2025 is to see combined production of Dacia-Lada models reach 1.1 million units from 300,000 units currently.
Renault also promises to launch seven models across its budget brands by 2025 – the majority will be B-segment but the modular platform means the brands will also launch two C-segment-sized models. One such C-segment Dacia concept was revealed on stage today in the form of the Dacia Bigster – a rugged looking SUV with a focus on off-road capabilities. As the brands develop, it is clear that Renault is aiming to inject some more personality into Dacia beyond simply being seen as an affordable nameplate – this would mirror the way Volkswagen was able to give Skoda a brand identity beyond simply being known as an affordable option.
On the higher performance end of the spectrum, Renault is targeting the transition of Alpine from a niche sports car maker to the centrepiece of its performance ambitions. This will see it incorporate not only Alpine-branded models, but also take over charge of Renault’s sports car division known for its exciting hot hatches, and the Renault Sport Racing Formula One operation.
Darkened press images hinted at a possible three-car lineup for Alpine that includes a sports car – likely the current A110 – along with what appears to be a hatchback and an SUV, demonstrating the brand’s intent on becoming the face of Renault’s sporty vehicles across all segments. To underline the wider group push toward electrification, Alpine’s lineup will be entirely electrified in the future and it confirmed that it had agreed with Geely’s Lotus Cars to co-develop a next-generation electric sports car, helping share costs on this more niche model.
The group aim is for Alpine to reach profitability in 2025. This goal includes expenditures on motorsport activities, especially for Formula One which helps reach a huge audience but can cost equally large sums of money to compete in. Stronger performance in the next few championships would help push Alpine into the global stage and could help grow brand awareness around the world.
Finally, as Renault rationalises its vehicle offering across its portfolio of brands, it has also committed to addressing new business models through its Mobilize unit. The goal here is to leverage new ownership strategies through subscription models and leasing programs, along with providing fleet solutions for shared mobility services including ride hailing and car sharing. In addition, Mobilize aims to help Renault profit from data and energy-related services such as static power storage.
It presented four possible concept vehicles for the Mobilize unit. Two directly aimed at car sharing networks that users can access on a pay-as-you-go or subscription basis without owning the actual vehicle. A third model due in 2022 is built exclusively with ride-hail models in mind and will likely be sold to large fleets. Finally, Mobilize revealed an electric last-mile delivery vehicle designed with versatility in mind, able to be configured as a van or as a compact flat-bed truck depending on the particular use case.
Ultimately, Renault hopes its Mobilize brand will help it access growing new mobility services and allows it to incorporate a number of its existing assets into the value chain. This includes financial services via the RCI bank handling leasing and subscription payments for car sharing and ride hailing. Renault also plans for its Re-Factory to play a large role in maintaining these vehicle fleets, ensuring uptime for customers while also enabling a more eco-friendly vehicle lifecycle thanks to battery and component recycling, remanufacturing or reuse.
See also: Renaulution – the future models changes