Renault raises 2022 margin goal as electric line-up widened

Renault SA raised mid-term sales and earnings targets as part of the French carmaker’s plan to protect its leadership in battery-powered autos and keep pace with rivals in driverless models.

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Renault SA raised mid-term sales and earnings targets as part of the French carmaker’s plan to protect its leadership in battery-powered autos and keep pace with rivals in driverless models. Renault will boost annual revenue through 2022 to more than a previous target of 70 billion euros ($82 billion) and the operating margin will exceed an earlier prediction of 7 percent of sales as efficiency measures generate savings of 4.2 billion euros. With investments of 18 billion euros, the company will bring out 8 pure-electric and 12 hybrid models in the period, and develop 15 vehicles with autonomous features.

“We intend to remain the leading provider of mass-market electric vehicles,” Chief Executive Officer Carlos Ghosn said Friday in Paris at a presentation of Renault’s updated business strategy, dubbed Drive the Future. Battery-powered vehicles are “turning into a significant contributor to our performance,” and “our vision is obviously now a profitable core business” in the segment.

Renault and long-time partner Nissan Motor Co are under pressure to defend an early advantage in electric cars as Tesla Inc rolls out the lower priced Model 3 and Volkswagen AG plans a 20 billion-euro push into making electric cars for the masses. While the Renault-Nissan alliance sold the most battery-powered vehicles in the industry to date, the advantage has amounted to little amid tepid consumer demand. The automaker, based in the Paris suburb of Boulogne-Billancourt, is building on a strategy outlined three weeks ago with Nissan and fellow Japanese partner Mitsubishi Motors Corp. to bring out 12 purely electric vehicles by 2022 as well as at least one fully automated model.

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Renault laid out the 2022 financial goals in February. The initial revenue target amounted to an increase of more than 37 percent from last year, when the operating margin was 6.4 percent of sales. Last week, Citigroup Inc analyst Mike Tyndall called those objectives “cautious.” The savings goal compares with 3.2 billion euros in spending reductions in Renault’s previous business plan, Ghosn said Friday. The carmaker pledged to maintain the margin at or above 5 percent during the planning period. Even so, it faces roadblocks, including price pressure in some markets as customers resist the cost of new technology, particularly to meet tightening emissions standards.

Renault’s shares rose 0.3 percent to 85.86 euros as of 9:10 am in Paris. The stock has gained 1.6 percent this year, valuing the company at 25.4 billion euros. The French carmaker is the first of the three alliance partners to publish its 2022 business plan. Yokohama-based Nissan will unveil its program on October 16, and Tokyo-based Mitsubishi Motors will release its strategy two days later. Renault owns a 44 percent stake in Nissan, while Nissan owns 15 percent of Renault. Mitsubishi joined the alliance last year, when Nissan bought a 34 percent holding. Ghosn is also chairman of the two Japanese manufacturers.

The industry shift to battery-powered cars is being pushed by increased regulatory scrutiny following Volkswagen AG’s diesel-emissions scandal and government efforts to reduce air pollution by phasing out combustion engines. While Nissan and Renault together lead the battery-powered segment with their respective Leaf and Zoe cars, auto buyers have resisted electric vehicles because of limited ranges and higher prices. Renault is targeting sales of 5 million vehicles a year by 2022, a 40 percent gain from last year, by doubling sales outside Europe. The push abroad focuses on markets including China, Russia, Brazil, India and Iran. “This new plan will unleash our full potential to innovate and grow in a rapidly changing industry,” Ghosn said.