Renault SA is adopting a cautious stance as it forecasts stagnant returns for the year amidst subdued demand for electric vehicles. The French automaker plans to counter this challenge by revamping its lineup and introducing ten new models in 2021, including the highly anticipated all-electric R5. Despite the flat returns projection, Renault aims to achieve an operating margin of at least 7.5% by 2024, slightly lower than the 7.9% recorded last year. The company also proposed its highest dividend since 2019.
Under the leadership of CEO Luca de Meo, who took charge in July 2020, Renault is focused on reducing the cost of producing new electric vehicles through partnerships. The company had initially planned to sell shares in its EV and software business Ampere through an IPO. However, this plan was scrapped due to market challenges, including intense competition from Chinese manufacturers and Tesla Inc.'s frequent price cuts.
The demand for electric cars has cooled off recently, prompting several automakers to delay the rollout of new models. In addition, car-rental companies are cutting back on fleet purchases. In response, de Meo believes that replacing low-margin vehicles with more profitable options is the way forward. This strategic move will help Renault maintain stability in a challenging automotive market.
Renault does not anticipate growth in European or Latin American automotive markets this year. However, the company aims to generate a minimum free cash flow of €2.5 billion ($2.7 billion) by 2024, compared to €3 billion last year. Thierry Pieton, Chief Financial Officer of Renault, emphasized the importance of caution and profitability, stating that the company will focus on vehicles that offer higher profit margins.
Despite revenue growth of 13% to €52.4 billion in 2020, Renault fell slightly short of analyst expectations. However, the company experienced robust sales in its main market, Europe, particularly with the successful launch of vehicles like the Megane E-Tech. Renault is actively exploring collaborations with other automakers, including Volkswagen AG, to share the costs of developing more affordable electric vehicle platforms. The automaker is also pooling its combustion-engine assets with Chinese firm Zhejiang Geely Holding Co.
As Renault navigates through challenging market conditions, the company's strategic focus on revamping its lineup, controlling costs, and exploring collaborative partnerships highlights its determination to adapt to the evolving automotive landscape. By addressing the current slowdown in electric vehicle demand and prioritizing profitability, Renault aims to maintain a strong position in the market and fulfill its long-term goals.