Renault revenue beats estimates as EV price pressure grows

Renault Group reported better-than-expected sales in the first quarter on robust demand for new models such as the Austral sport utility vehicle and improving supply of key auto parts such as semiconductors.

Group revenue rose 29.9 percent to 11.5 billion euros ($12.6 billion), the French carmaker said Thursday, above analyst estimates of €11.3 billion. Renault also confirmed its full-year outlook.

“Renault Group is off to a solid start in the year,” Chief Financial Officer Thierry Piéton said in a statement. “The strong order book at the end of March and all forthcoming launches will keep supporting the Group’s commercial activity.”

While years of supply-chain bottlenecks have left carmakers with record order books, high inflation and interest rates are expected to weigh on future demand. Tesla recent moves to slash prices for its EVs in Europe complicate Renault Chief Executive Officer Luca de Meo’s efforts to keep stickers elevated even as parts shortages ease.

Renault will probably be forced to reduce prices for EVs including its Megane E-Tech to generate the necessary volumes it needs to comply with emissions limits in Europe, Bank of America analysts said in a recent note. If Renault addresses the concerns by lowering Megane prices, it would have a negative impact on earnings, the analysts wrote.

Earlier this year, de Meo signaled the company wouldn’t follow Tesla’s price cuts, branding its U.S. competitor’s strategy as risky. However, Renault said earlier this week that it would review prices worldwide after Tesla price cuts of up to 30 percent in the United States, China and Europe.

Renault confirmed its targets for 2023, with the group operating margin seen at least at 6 percent and an automotive operational free cash flow of at least 2 billion euros.

It said its order book in Europe stood at 3.3 months of sales at the end of Q1, and would remain above the target of 2 months through 2023. Overall sales in Europe rose by 27.3 percent in the first three months of the year, outperforming a 16.2 percent average increase for the market.

The carmaker, which was hit harder than most rivals by the COVID-19 crisis and a global chip shortage, is in the middle of a turnaround and is betting on higher-margin and electric cars to boost profits.

The group is ramping up the launch of new models to spur growth. It plans to launch a SUV version of its Espace minivan and a restyling of its best seller Clio city car, and 12 new models in 2024.

Renault also is working on reaching a final agreement with Japanese partner Nissan 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. 

Bloomberg and Reuters contributed to this report