Renault: repair job | Financial Times

Renault’s car crash started slowly, then happened all at once. In just two years, the French automaker lost its last chairman and chief executive to a scandal, watched local rival PSA merge with Italy’s FCA, and witnessed the pandemic hammer auto sales. As economies rev up for recovery, Renault faces a global shortage of specialist semiconductor chips. Never mind racing ahead, maintaining a straight line will be a struggle this year.

Newish chief executive Luca de Meo fears chip shortages will stymie output. In Friday’s full-year results, he noted that Renault’s production could drop by another 100,000 cars. The group made 2.9m vehicles last year, already down a fifth. While the second half of 2020 did improve over the first, Renault still lost more than €8bn last year.

Automotive free cash flow went deeply into the red, which swelled the net debt position to €3.6bn. This was about half a billion more than analysts had expected. The bad news, along with de Meo’s pessimistic forecasts, caused Renault’s share price to veer off course on the day, after a decent rebound this year. Renault fell 5 per cent while the broader French market climbed.

Renault needs to launch some new models soon in order to counter a structural change in its market. Not only are car ranges rapidly electrifying but new entrants — from Tesla to NIO — can attract capital quickly. Until recently partner Nissan had only two electric models. But this year it has launched an all new electric SUV, the Ariya. Once a leader in EVs, Renault has decelerated. Given its financial weaknesses the French group seems a couple of years behind the industry, thinks Jefferies.

It is not all bad news. Renault has electrified its leading internal combustion models, such as the Megane and Captur. Meanwhile, pricing competition among mid-range Mercedes, BMW and Honda models has diminished.

Some contrarian investors will be caught rubbernecking, keen on a turnround story. But for most it is better to keep moving past Renault’s shares.

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