Dacia can grow margins by 50%, Renault says

PARIS -- Renault is targeting even bigger margins for Dacia, its "value for money" Romanian brand that has been a profit engine for the group.

Dacia margins are now 10 percent, CEO Luca de Meo said Tuesday in his "Revolution" strategic plan update, and the brand will reach 15 percent by 2030. That level is similar to what premium brands such as BMW and Mercedes-Benz are now achieving.

Renault acquired Dacia in 1999 and used it as a platform to launch the Logan project, a "design to cost" small car that would sell for under 5,000 euros. 

The Logan and subsequent models have drawn from existing technology from Renault-Nissan and benefited from lower production costs in Romania and Morocco. A haggle-free pricing policy and focus on retail sales help to keep distribution costs low (Renault says they are 50 percent below the Western European average) and margins high.

Dacia is now poised to attack the more-profitable compact segment, starting with the seven-seat Jogger crossover this year. A compact SUV, the Bigster, is due in 2024, and it will be followed by two more compact models by 2030. 

Read more: Why Dacia is reworking its winning sales strategy

"Dacia will boldly enter the C [compact] segment, where margins are at least twice as high as where it plays today," said de Meo, who describes Dacia as Renault’s "golden nugget."

"This will give Dacia the chance to double profit pool coverage from 15 billion euros to 30 billion euros, and increase turnover per unit by 50 percent," he added.

Dacia CEO Denis Le Vot, a longtime Renault-Nissan Alliance executive, has prepared Dacia’s move upmarket with a new focus on "value for money" rather than solely on low prices (although the least-expensive Sandero small car still starts at less than 10,000 euros in some markets, and the most-expensive models are about 20,000 euros). He has also given Dacia an image makeover, with a range of outdoorsy colors and a large white "Dacia link" logo.

Dacia suffered a potential setback this year when Renault divested its Russian operations, which included the best-selling Lada brand, in the wake of Moscow’s invasion of Ukraine. Le Vot was to head a combined Dacia/Lada unit that would share platforms and development costs.

The launch of the Jogger – more than 38,000 were sold through September -- helped to make Dacia one of the few volume brands in Europe to record a sales gain through the first nine months of this year, in a market that is down by about 10 percent. Dacia sales are up 17 percent, according to figures from Dataforce. Another strong seller is the Spring electric minicar, which has become one of the best-selling EVs in Europe with more than 31,000 sales in that period.

Dacia’s compact entrants will follow the example of the Jogger, which is built on an extended version of the Renault-Nissan Alliance’s CMF-B platform rather than on the CMF-C/D, for compact and midsize cars. This helps keep weight and cost down, with an expected 2 million Renault/Nissan cars built on the CMF-B platform by 2030 from 1 million now.

Dacia will be part of the Power core group of combustion-engine cars in the reorganized group, along with Renault brand and light-commercial vehicles, and as such will not have its own profit/loss line, in contrast to the Alpine sports-car brand.

One potential trouble spot for Dacia is cutting emissions while keeping prices low. The Spring, imported from China where it is built by one of Renault’s partners, has proved that a low-cost EV can be popular. But building a range of full-electric cars in Europe could pose cost challenges. 

De Meo’s "electrification a la Dacia" plan starts with LPG cars, then moves to full-hybrids and 48 volt mild hybrids before fully electrifying across the range by 2035, five years after the Renault brand is set to do so. 

The first hybrid option, on the Jogger, will appear only next year, and it is expected to use the first-generation E-Tech full-hybrid system, rather than the second generation that has started to appear on Renault brand models.

De Meo said Dacia would benefit from alternative and synthetic fuel development in the new Horse joint combustion-engine venture with Geely, as well as be a customer for "lower cost and accessible" cars from the Ampere electric vehicle unit. 

"Dacia will remain Dacia, just getting bigger and shooting for a 15 percent operating margin by 2030," de Meo said.