Renault CEO Luca de Meo on technology spending

Renault’s CEO Luca de Meo said the carmaker will move from a car company working with tech to a tech company working with cars.
Renault IT investment
Renault has pledged more cost cuts and to focus on a smaller number of profitable models as its CEO laid out plans to revive the ailing automobile business affected by management turmoil and the COVID-19 crisis.

Luca de Meo said he would simplify manufacturing and rein in spending in areas like research, while cutting car production to 3.1 million units in 2025, from 4 million in 2019. Luca de Meo did not reveal specific details on technology spending.

Renault’s new plan is a marked departure from the ambitious one laid out four years by former boss-turned-fugitive Carlos Ghosn.

Ghosn’s strategy was built on growing car volumes globally – a plan critics say forced the carmaker to pursue size over profits.

“We grew bigger but not better,” De Meo said during an online presentation on Thursday, adding that the task now was to “steer our business from market share to margin.”

Renault will build vehicles on fewer shared platforms to pare back costs by 600 euros ($730) per car by 2023. Half of Renault’s vehicle launches will be electrified versions by 2025, and electric models should have better profit margins than their fossil-fuel equivalents, the carmaker said.

Jefferies analyst Philippe Houchois described the company’s profit targets as “underwhelming,” reflecting the “depth of challenges at Renault.”

Renault plans to cut development time for a new vehicle by a year, to under three years and announced a new business unit, called Mobilize, focused on “new profit pools” from data, mobility and energy-related services.

De Meo, who previously ran Volkswagen’s Seat brand, aims to derive at least 20 percent of Renault’s revenue from that business by 2030.

Renault was struggling with waning sales even before the COVID-19 crisis and has been trying to get a partnership with Japan’s Nissan back on track.

Renault on Thursday hiked its cost savings target by 500 million euros to 2.5 billion euros by 2023, and set goals to gradually ramp up operating margins, reaching 5 percent by 2023.

The company also plans to lower capital spending and research costs to 8 percent of revenue from 10 percent by 2025.

Renault has yet to publish margins for 2020, though following the COVID-19 pandemic which disrupted operations, they are likely to be lower than the 4.8 percent hit in 2019.

Renault said it was targeting automotive free cash flow of 3 billion euros by 2023, and 6 billion by 2025.

Related News

Latest News

Latest News