Renault SA slumped amid concerns that pricing pressure across the auto industry will threaten the French carmaker’s earnings recovery.
(Bloomberg) — Renault SA slumped amid concerns that pricing pressure across the auto industry will threaten the French carmaker’s earnings recovery.
Renault fell as much as 7.9% in Paris after Tesla Inc. signaled it’s not done reducing stickers of its electric vehicles, even at the expense of its industry-leading profit margins.
While years of supply-chain bottlenecks have left carmakers with full order books, buyers increasingly struggle with high inflation and interest rates. Tesla’s recent price moves complicate Renault Chief Executive Officer Luca de Meo’s efforts to keep stickers elevated even as parts shortages ease.
Read More: Tesla’s Not Done Cutting Prices as It Protects Lead in EVs making progress
Renault will probably be forced to reduce prices for EVs including its Megane E-Tech to generate the volumes it needs to comply with emissions limits in Europe, Bank of America analysts said in a recent note. Such a move would have a negative impact on earnings, the analysts said.
While pricing will likely become “a little softer” in the second half, it will remain positive, Piéton said on a call. The company won’t make any drastic price cuts to the electric Megane, a key product, he added.
Leasing fees for the battery-powered Megane are competitive, and “if we have to take slightly lower volumes, so be it,” the CFO said.
The company flagged an order book in Europe — its main market — at 3.3 months of sales at the end of March. The metric will remain above the target of 2 months through the year even with a market 30% below pre-pandemic levels, the company said.
Earlier this year, de Meo signaled the company wouldn’t follow Tesla’s price cuts, branding its US competitor’s strategy as risky. The manufacturer is pushing ahead with a deep revamp of its business.
Read More: Renault to Review EV Prices as Tesla Pressure Mounts
Renault also is working on reaching a final agreement with Japanese partner Nissan Motor Co. that will allow the companies to rebalance their troubled two-decade alliance. De Meo has pursued the deal as he seeks to split Renault’s businesses and work with new partners amid the industry’s transition to EVs and increasingly sophisticated software.
(Updates with shares in second paragraph.)
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