Renault CEO Luca de Meo's turnaround plan for the money-losing automaker, which he calls "Renaulution," re-centers the group around profits and value rather than volumes. That will mean fundamental shifts in regional strategy, in products, in production and in management. De Meo, who started at Renault last July after holding top posts at Volkswagen Group and Fiat, recently spoke with Automotive News Europe Associate Publisher and Editor Luca Ciferri and News Editor Peter Sigal about what to expect from Renault in the coming years.
One of your goals is to optimize Renault's presence in countries outside of Europe -- India, Latin America and South Korea. Could you elaborate on that a bit?
Renault has had a global strategy which in many aspects worked: more than 50 percent of our volumes were outside the European perimeter; we are less dependent on Europe than our neighbors [PSA] were before the integration into Stellantis; and we have seven engineering centers and 16 production sites outside of Europe. This company became much more international in the last 20 years, and I'm not counting the whole impact of the alliance that made Renault a much more global company than when I was here [in the early 1990s].
But if you view it through the lens of profits, the picture looks very different. In fact, we were still doing in 2019, even before the crisis, maybe 50 percent of our results in five European markets, 75 percent in the European perimeter -- and the other 100 countries accounted for 25 percent of the total profitability. So, I think this is a situation we have to correct. Of course, you don't change that overnight, and we understand that structurally your domestic market -- and we consider that Europe -- is always the biggest source of profitability, so we are not naive.
Where can you improve?
As we were looking for volume and market share, we would enter every market in the lower segments to make it easier to reach volumes and to establish a plant that would be big enough to be efficient. But we didn't take the next step. That means, for example, in Brazil we would localize a [budget] car like the [Dacia] Logan and when you reached your 5 to 6 percent market share and filled the plant with 150,000 or 200,000 vehicles, then the right thing to do was introduce a car in a higher segment to "seat" the brand in a position consistent with the position of the brand globally, and also maybe a car that will give you more of a margin. This didn't happen.
So, what we are trying to do, again using Brazil as an example, the team was given a target of a 10 percent market share, so in a 3 million car market we prepared a capacity of 300,000 cars. Then, we sold 200,000, then 150,000 then 80,000. What we have to do in Brazil is, first of all, lower the break-even point. That will mean cutting shifts, unfortunately laying off more than 800 people. Then, because the economy is a little uncertain, we will freeze investment in the short term. But, we will re-purpose the money on things such as the Bigster and Duster [SUVs], in Renault versions, so we can lift the average transaction price, following the examples of Volkswagen and even Fiat, which went from only Fiat products to Jeep and was very successful. And we are not seeking a 10 percent share, but maybe 5 or 6 percent. At that level you are a relevant brand, you are visible, but we will have a better quality business.
What about strengthening Europe, Turkey, Morocco and Romania?
If you look at the numbers and our internal benchmarks, [Renault factories in] Spain, Morocco, Turkey and Romania are the strong point of our industrial system. By allocating products there and filling capacity we will be able to gain 20 points of competitiveness. Remember that many cars sold in Europe are actually built in those places, so we really have an advantage, and we want to leverage that. It's about betting on a winning horse. This is the winning horse of Renault.