CEO Luca de Meo on the new Renault: 'Look at it as a tree with branches'

After helping Renault Group recover from deep losses in 2020 and resetting the automaker's future product direction with his Renaulution plan, CEO Luca de Meo is not resting on his successes. Last autumn, de Meo announced a fundamental restructuring of Renault that will see the spinoff of full-electric activities as Ampere; a joint venture with Geely to build combustion engines in a division called Horse; a separate unit for circular economy activities; a stand-alone Alpine sports and racing brand; and the core activities of Renault and Dacia renamed Power. De Meo talked to Automotive News Europe Associate Publisher and Editor Luca Ciferri and News Editor Peter Sigal at Renault headquarters in Paris about the road ahead.

With all the structural changes coming to Renault Group, what will be left in the core company?

There are a lot of functions where it doesn’t make sense to split the company in parts, such as finance, HR, industrial planning, so we have a lot of people who will stay within Renault Group. We want to push resources closer to the [separate] businesses, because they will be able to report their own results, they will have their own profit/loss statements, their own governance and feel the pressure of the market. 

What will be the role of Renault Group in that case?

Renault Group will be light, with the ability to think strategically. When you are busy assembling cars or developing services, you don't have enough time to build the future. We need to improve and develop the ability to do that. The group will also set the overall direction, and do some arbitrage, because by definition there will be some disagreements between units. There will be moments where I say, "OK guys, I understand your arguments but I need to 'cortar el bacalao' " (cut the cod, or make a decision), as the Spanish say. Then you have to avoid things that are being duplicated, and obviously the group has to have the relationship with some of the key partners, including the Alliance [with Nissan]. I think there is enough work to be done.

How will you manage the group?

We are developing a kind of a "digital twin" of the company in the cloud. It sounds like science fiction, but this will help bring Renault from a structural organization point of view into the league of the Procter & Gambles and other sophisticated companies. We will have six IT architectures, including product development, quality, finance and purchasing. We have already started with our industrial operations, which we are doing with Google and Qualcomm as partners, and then we are adding logistics end to end, from suppliers to distribution. 

You put everything together, you connect -- and then you actually manage the company through data. We are doing it on the industrial side, where we now have a completely digitized twin. 

How did you get to that point?

The key was standardization of the data. In every big company data for the same fact can be presented in different ways, so the way sales and marketing sees a price, for example, is different from the one that is seen by finance or billing. So, when you have the same data attached and everybody can access it, it changes the game. The idea is to manage the businesses not through committees or boards, but through the data, breaking the silos -- and then we have everything also as a digital twin. 

Renault Group has about 100,000 employees, with about 75,000 not planned to be in the Horse, Ampere or Alpine units. What will they be doing? 

Look at it like a tree with branches. The trunk will always be Power [that comprises Renault passenger cars and light commercial vehicles, as well as Dacia], so you make branches grow from that. I prefer to say we are redesigning the value chain of Renault. As [CFO] Thierry Pieton says, 20 percent of our business is either growing more than 10 percent or has double-digit profits. If we execute this separation correctly, we will have 50 percent of our business either with more than 10 percent growth or double-digit profits. So, my intention is to direct employees where the business is. And of that 75,000 in Renault Group, you have a lot of people working on the production side in the plants.

So they would remain in Renault Group? 

Yes.

The Power unit will report its own results, right?

We will consolidate that [in Renault Group]. What we will publish is Ampere, potentially Alpine, Mobilize, The Future is Neutral [circular economy], and Horse [the joint venture with Geely responsible for internal combustion powertrains]. But the degree of transparency we will have with the "tree and branches" is much higher we had before. For example, we were in a situation where we would not underline profitability per brand.

So, Dacia had a 15 percent margin and Renault was at 5 percent?

Or even less.

Would you break out Dacia as a brand from Power?

Operationally, that is the case today. Dacia has its own plants, its own engineering, but they are still a little bit connected because you don't want to put people on islands. If Dacia needs more capacity, before they build a greenfield [new factory], they would probably have to look at available capacity in a Renault plant. Two years ago we made the decision that Dacia would have its own board and take responsibility for its factories in Morocco and Pitesti (Romania). They have responsibility on their platform, CMF-B Global Access. 

The Renault factories will still be owned by Power?

Apart from Alpine and apart from ElectriCity [EV-focused factories in the north of France], which will be Ampere. 

Who will sell EVs made by Ampere? Renault dealers with a separate contract, perhaps the agency model?

Our idea is not to separate Ampere downstream. Europe is switching to all-electric, so there is no reason to have different national sales companies. We might have some people in the startup phase who will concentrate on Ampere, because maybe we want to have a slightly different engineering of the customer experience, including charging and maintenance. But I'm not going to put up a wall [between Ampere and non-electric models] because it doesn't make sense. However, we have signed a contract with almost all of our dealers that has a lower base margin for EVs.

How large will Qualcomm's stake in Ampere be?

We believe that partnering with Qualcomm will be a game changer in the long run. Through our recent experiences, notably on Megane-E, we developed a relationship that goes far beyond a commercial one. We take it to the next level with Qualcomm’s consideration to invest in Ampere.

But their investment should be symbolic. Beyond that, we see interest from potential investors because Ampere is a unique project -- we are building a 1 million annual sales EV/software player in Europe, done by people who know what they are talking about, with all the assets and engineering. In the case of Qualcomm, it will be the first time a tech company invests in automotive. The stake is value in kind for engineering hours, there are deals about competitiveness and cost and also guarantees on semiconductor supply, so a combination of different things.

You are calling for 8 billion euros in revenue for Alpine by 2030. You could reach that target by selling 200,000 cars with an invoice of 40,000 euros.

More than that.

So, 120,000 units with an invoice of 65,000 euros?

In between that. I think that will be the volume range, but we will have a lineup of five or six cars, between dedicated Alpine models and Renault derivatives. Potentially, they can be sold anywhere, including China and the U.S.

Among them are larger electric crossovers. Could they be built in South Korea to take advantage of favorable tariffs, using a platform from Geely, your partner in the Renault factory there?

We are looking at different options. One could be Korea, while we are scouting for options on the platforms, but the vehicles will be full electric.

Alpine is targeting a 10 percent profit margin, while you are aiming at 15 percent for Dacia?

Yes, because expanding the Alpine brand is a 20 years' journey. You need two or three generations of models, so there is a substantial investment. But the fact that Alpine is using an electric, asset-light model makes it a unique case. It's closer to models like Polestar, because it's leveraging a lot of assets but still has unique technological bricks. 

When I look at the C+ [larger compact] segment crossover we are doing, we are using the CMF-EV platform, but it's substantially modified because we have changed the rear axle, we have active torque vectoring, we're using premium chemistry for the battery and we are using a more sophisticated electric motor.

When Renault exited Russia, did the intellectual property (IP) of current and future Lada models remain with Renault?

The IP for future products that would have been launched with Renault is ours, including the platform architecture. They might be able to make models derived from the current Vesta or Granta.

You have said that by 2025 it will take less than 10 hours to build an EV in France, better than a pure EV player. How will you get there?

We are designing our pure EV factories, starting from the product, to be extremely efficient. To give you an example, we started with 2,600 parts per car on average in our plants; we are now at 1,500 to 1,600, so we are down more than 40 percent. With an EV, we are looking to get below 1,000 parts.

You were just named president of ACEA, the European automakers' lobbying group. What are your plans?

It's a key moment, not only because of the new Euro 7 pollution standards that could be counterproductive in its current shape, but mainly because our industry is at a turning point toward zero-emission mobility.