Renault to rely on low-cost and electric cars to boost sales

PARIS: French carmaker Renault expects a first-mover edge in electric cars and a wider vehicle line-up for emerging markets to help it deliver a 44% sales increase by 2022.

Electric cars are “turning into a significant contributor to our performance while other automakers are just starting the journey”, chief executive Carlos Ghosn said yesterday.

Renault’s mid-term plan shows it growing faster than alliance partner Nissan, which it trails in China, due to recent investments in Iran and India and a Russian rebound.

While taking a lead in electric vehicles had come at the expense of profitability, Ghosn expects to turn this around by rolling out eight new battery-powered models and 12 hybrids.

“Our vision now is a profitable core business.”

Renault plans to increase sales to 5 million vehicles in 2022 from 3.47 million last year - while also targeting a 7% operating margin

� and 70bil (US$82bil) in revenue, goals that were announced in February.

Renault also said yesterday that its margin would stay above 5% over the intervening

� years, as it pursues 4.2bil in cumulative

� productivity gains and invests 18bil in research and development.

The stock may be supported in coming weeks by “management’s increased confidence” on the mid-term goals, Evercore ISI analyst Arndt Ellinghorst said.

“This is good news in a world where most people fear earnings, cash flow and profitability will fall due to disruption,” Ellinghorst said.

China, where Renault only began manufacturing last year, is expected to account for half a million sales by 2022.

Renault’s budget car lineup, starting with the Dacia Logan in 2004, has underpinned the push into emerging markets and spawned a second car platform underpinning the Kwid mini-SUV, which has more than doubled the group’s sales in India. Combined sales of the “Global Access” lowcost lineups are seen expanding 54% to reach 2 million vehicles, or 40% of the group total. An expanded utility van range is also expected to contribute to the emerging-markets surge.

The European share of Renault’s vehicle deliveries would shrink to 36% from 52% under the plan, with sales in the home region remaining broadly flat.

Renault had been transformed since 2005 - when he took over - from a carmaker dependent on French sales of Megane compacts into a “resilient, multi-polar global company”, Ghosn said.

Ghosn, who also heads the RenaultNissan-Mitsubishi alliance, has not yet indicated whether he will seek to renew his Renault CEO contract, which expires next year.

Renault also outlined a new dividend policy yesterday, promising to increase shareholder payouts to 15% of earnings by 2022, from 7% last year.

In addition, it will continue to pass through its own Nissan and Daimler dividends to Renault shareholders.

Renault owns 43.4% of its Japanese alliance partner and 3.1% of the Mercedes-Benz maker.

This is good news in a world where most people fear earnings, cash flow and profitability will fall due to disruption. Arndt Ellinghorst