Renault's push to grow outside Europe is off to a mixed start

Peter Sigal is a France-based correspondent with Automotive News Europe.Peter Sigal is a France-based correspondent with Automotive News Europe.
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Renault CEO Carlos Ghosn is betting that growth outside of Europe will drive revenues over the next six years. But, following flat growth in the first full quarter since Ghosn unveiled Renault’s Drive the Future midterm plan, it's not yet clear whether that strategy will pay off.

Ghosn says Renault will double its sales outside Europe and triple revenues by 2022. The company has invested billions in the so-called BRIC countries -- Brazil, Russia, India and China -- as well as North Africa and the Middle East, in the hopes that when those markets mature, it will be in a leadership position.

First quarter revenues, revealed on Friday, rose just 0.2 percent, weighed down by "massive" foreign-exchange headwinds (-4.8 percent) and slowing sales in China, India and North Africa and the Middle East. However, sales soared in Russia and Brazil, as both countries' auto markets emerge from deep slumps.

In comparison, Renault's mass-market rival PSA Group, which is heavily weighted toward Europe (and has taken some criticism for that) had double-digit growth in the first quarter. Revenue was up 13 percent (excluding Opel and Vauxhall) over 2017. Foreign exchange effects were just minus 2.8 percent.

The volatility inherent in Renault's overseas aspirations can be explained by looking at a risk/reward ratio tracked by BMI Research. BMI ranks each region and country on a scale of 0 to 100, with the higher the score, the more attractive the market. The global average is 50.

In the latest index, released on Tuesday, Europe ranked first among regions with a score of 61. Most Western European nations score 70 or above, meaning low risk and high reward. Within Europe, however, Russia and Turkey, Renault's second- and 10th-largest markets, are classified as high risk/high reward.

As a region, Asia scores 51, with India squarely in the middle of the risk/reward matrix, at 52 points out of 100. China fares rather better, with a score of 63, although BMI notes that the market "still exhibits many emerging markets characteristics," including low car ownership rates and a less-developed regulatory environment.

The Americas rank third, with a score of 48. Brazil’s score, at 64, is nearly identical to China's. The region with the highest risk and least reward is the Middle East and Africa, with a 46 -- and Renault's sales there slumped by 5.3 percent.

The quarter was hardly a disaster for Renault. Sales overall were up 4.8 percent, outpacing the global market by two percentage points. But disappointing results in China, which is Renault's "No. 1 priority" overseas and in India, where the Kwid supermini crossover slumped after a strong introduction, are a stark reminder that risk and reward go hand in hand.

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