Renault revenue unexpectedly shrinks as rivals recover

PARIS -- Renault's revenue unexpectedly fell in the first quarter as the automaker lagged behind European peers in recovering from the pandemic.

Sales fell 1.1 percent to 10 billion euros ($12.05 billion), the company said in a statement on Thursday. BMW and Daimler, by contrast, have reported better-than-expected preliminary results for the quarter.

Renault's reliance on Europe and a portfolio of mostly mass-market vehicles have dragged on its prospects for bouncing back from the global health crisis. Many countries in the region including France are still struggling to control the virus and have kept lockdown measures in place.

Car sales in Europe have been slower to rebound than in China, where Renault barely does any business unlike German automakers Volkswagen, BMW and Daimler.

Renault got a boost from rising vehicle prices in the quarter, for the third consecutive quarter, although this was not enough to offset the hit from shrinking inventories and other headwinds such as unfavorable foreign exchange effects.

The automaker reduced inventory by 26 percent from a year ago to 487,000 units at the end of March.

The Renault brand's car sales by volume was up 1.1 percent from the first quarter of 2021, but this was far behind the 21 percent jump at Volkswagen in the period.

While sales of the battery-powered Zoe model dropped, the company has taken almost 10,000 pre-orders for its Dacia Spring full-electric minicar. The electric lineup is being challenged by rival models made by VW and Stellantis, the company formed from the merger of PSA Group and Fiat Chrysler Automobiles.

Renault last year quit its main passenger car business in China due to weak sales there, and is more dependent on its core European market, where some lockdowns to tackle the crisis are still in place.

"We're still far from being in a normal situation," Renault finance chief Clotilde Delbos told a conference call, adding that the company preferred not to give financial guidance due to the uncertain environment.

The pandemic added to pressures on Renault that already included overcapacity in its factories and problems at alliance partner Nissan.

Renault took a 5 billion-euro French state-backed loan last year, and last month sold its stake in Daimler for 1.14 billion euros to safeguard its credit ratings.

Renault does not report earnings on a quarterly basis. It posted a record loss last year due mostly to impairments and restructuring costs at Nissan.

Under CEO Luca de Meo, who took the post last July, the company is looking to produce fewer cars and focus on those with higher margins, a strategy that is starting to bear some fruit.

De Meo unveiled a turnaround plan in January that underwhelmed investors.

Renault is targeting an operating margin of more than 3 percent by 2023 and at least 5 percent by mid-decade compared with a 4.8 percent return in 2019.

The company has also announced a plan to eliminate about 14,600 jobs worldwide and to lower production capacity by almost a fifth in a bid to cut costs by more than 2 billion euros.

Reuters contributed to this report