New strategy due as Renault looks to improve profits

03 May 2017

Renault CEO Carlos Ghosn has outlined the company strategy as it aims to grow its position following the acquisition of Opel/Vauxhall by PSA Groupe.

The company has already met the targets of its ′Drive the Change’ strategic plan, a year earlier than anticipated. Speaking at a conference about the manufacturers financial results, Ghosn told the audience: ′We achieved record growth. We achieved record profitability, and we have a record cash position.’

Under this strategy, group revenue increased to €51 billion in 2016 from €39 billion in 2010, while operating margin rose to 6.4%. Completion of a model renewal cycle also allowed Renault to see a sales increase of 12%. The company is now expected to reveal a new plan in autumn, with Ghosn having already stated that he wants to see revenues of €70 billion and an operating margin of at least 7% by 2022.

With sales expected to slow in Europe by that period, together with increased competition from PSA, which has taken the position of second-largest car manufacturer on the continent, Renault may have to look to sales in other markets and to its alliance with Nissan and tie-in with Mitsubishi, which is targeting its own growth in revenues, especially in Indonesia. Already the company plans to achieve savings of €5.5 billion through shared platforms, purchasing, manufacturing and technology by 2018.

There is also a question of how the manufacturer will deal with the perceived decline of diesel and rise of electric vehicles. Renault and Nissan have dominated the diesel market, with more than half of the French company’s sales in 2016 featuring a diesel engine. While the Nissan brand is leading the way in electric vehicle technology with the Leaf, the Renault branded Zoe does not share a platform with the Japanese model, although plans are underway to ensure this is achievable by 2021.

With Ghosn due to step down as CEO from Renault in 2018, although an agreement is in place for him to work past the retirement age of 65 should he wish, any successor would need to see the manufacturer’s strategy through to completion. In Q1 2017, Renault saw a 10.1% rise in registrations. Market share came out at 7.7% while electric vehicle sales increased by 46% to nearly 10,000 units.

Photograph courtesy of Renault