PARIS, (Reuters) – Renault expects its sales growth to accelerate this year as it launches a number of new models, the French automaker said on Tuesday, as it confirmed its profit margin and cash flow forecasts for 2024 and pushes ahead with cost cuts.
Renault posted a 1.8% rise in first-quarter revenue on Tuesday, with high interest rates lifting sales at its financing arm and car sales volumes by 2.6% versus a year earlier.
Renault is in the middle of a turnaround plan and spurring a shift to electric models. It is launching seven new models this year, including two fully electric models and two hybrids.
The global auto sector is bracing for a tough year amid slowing demand growth for electric vehicles, adding another challenge to companies already battling fierce competition from China.
A lack of affordable options has been a major stumbling block for broader mass adoption of EVs.
Chief Financial Officer Thierry Pieton told reporters Renault was on track to lower its EV costs by 40% by 2027.
Pieton told analysts that orders for the new Dacia Spring EV, which costs under 20,000 euros ($21,286), would start in the second half of this year.
He said thanks to rising EV and hybrid sales, Renault is confident it can meet fresh European Union CO2 reduction targets heading into 2025.
Sales volumes at Renault, maker of the Clio and Twingo, returned to growth last year after declining for four years in a row, but prices are under pressure due to weak global demand.
Leading EV maker Tesla is cutting prices in several markets, piling more pressure on European firms.
Tesla cut the price of its Model 3 to $39,990 in Renault’s home market, matching the starting price of the French firm’s new EV Scenic, which has a lower range.
Pieton said Renault would pass on cost reductions to customers through lower costs for new models rather than slashing prices. In the meantime, he said that strong pricing for current models would help counter foreign exchange headwinds.
Bernstein analysts wrote in a client note that “investors will be encouraged” by Renault’s pricing strategy and by the fact the automaker’s “overall messaging remains positive”. Renault reiterated its 2024 forecast for an operating margin target of at least 7.5% and free cash flow of 2.5 billion euros.
Renault reported first-quarter revenue of 11.7 billion euros ($12.5 billion) above the 11.49 billion estimated by analysts.
But automotive revenue eased 0.7% to 10.47 billion euros, hurt by foreign exchange rates in markets such as Argentina and Turkey, and independent dealers carried out higher destocking than in the same quarter in 2023.
Revenue from financing activity grew 27.9% to 1.25 billion euros, helped by higher interest rates.
($1 = 0.9396 euros)
Reporting by Gilles Guillaume and Nick Carey in London; editing by Himani Sarkar and Jason Neely
