Dacia-Lada business unit will unleash brands' power, Renault execs say

PARIS -- Under Renault Group ownership since 1999, the Dacia budget brand has generated double-digit profit margins through a frugal “design to cost” strategy. Lada, a once-struggling Russian brand now also under Renault’s control, has also become a profitable division of the French automaker.

But Renault thinks Dacia and Lada can be even stronger together, announcing this week as part of a group turnaround strategy that they will be combined into a single business unit that will turn their complementary strengths into even more profits.

CEO Luca de Meo said when he visited Dacia’s facilities in Romania – including a huge factory, a test center and design and engineering facilities – he saw “a full-fledged automotive company” that could be built into an international brand. 

Denis le Vot, Renault’s head of sales and regions, will be the CEO of the new unit, which will not yet have its own line in the group’s balance sheet. The plan is to add jointly developed models to each brand, including a compact SUV, on a single Renault-Nissan Alliance platform, and sharply cut the number of platforms and body styles. 

Adding compact segment models to the brands – which now rely almost exclusively on small cars such as the Dacia Sandero and Lada Granta -- will increase the size of their potential profit pool to 5 billion euros in 2025 from 3 billion in 2020, Renault says.

“The idea is to unleash the potential of Lada and Dacia,” le Vot said Thursday, “making them full-fledged international brands, enabling them to go beyond the current parameters in terms of markets and segments.” 

The two brands also have new, more modern-looking logos and identities: Dacia is “outdoorsy with a touch of coolness” and Lada is “rough and tough.” 

“Dacia and Lada will remain separate companies with their own brand history and strategy,” Le Vot said. “But they will benefit from more dedicated, focused and coordinated governance.”

He said that labor costs – for Lada in Russia and Dacia in Romania and Morocco – were less than 25 percent of those in western Europe, helping to give a “double digit” cost advantage against competitors.Dacia sold 520,765 vehicles in 2019, a 29 percent drop. It says the small Duster and Sandero were the best-selling vehicles in the retail segments in Europe. Dacia generally does not sell cars through lower-margin channels such as rentals.

Lada’s sales last year were 345,512, a 7 percent drop, giving the brand built by Avtovaz a 21.6 percent share of the Russian market, a one percentage point increase over 2019. It has the two best selling vehicles in Russia, with the Granta and Vesta.

But Dacia’s reach goes further than selling cars with its own badge. The Romanian brand leads the development of Renault’s low-cost Global Access range, which sells Dacia models labeled as Renault, Lada and even Nissan. For example, the Dacia Logan MCV is sold in Russia as the Lada Largus Universal; the Dacia Duster is sold as the Nissan Duster in Russia and the Renault Duster in India. 

A look at the combined brands’ product plan revealed Thursday shows 10 major model launches from this year until 2025, starting with the new-generation Sandero hatchback and sibling sedan Logan, both on the Renault-Nissan Alliance’s new CMF-B platform, and the Dacia Spring full-electric minicar (a version of the Renault K-ZE developed for China in 2019.) 

Dacia will get two more small models, one in 2023 (reported to be a small SUV) and a second in 2024. Lada will get two small models in 2023 and a third – which will use the Niva name -- in 2024, also on the CMF-B platform. A crucial shared model will be a compact SUV, shown as the Dacia Bigster concept on Thursday. That is slated to appear around 2025.

Another key to unlocking profits will be moving as many models as possible to the CMF-B platform, with the goal of selling 1 million units on the architecture annually by 2025. That will also reduce the number of body styles to 11 from 18.

Currently only the Sandero/Logan are based on CMF-B, but the coming Bigster/Niva will also use the architecture. 

Le Vot said that jointly developing vehicles for the two brands on the same architecture would allow 85 percent of components to be carried over from each.