Renault posts record H1 operating margin, helped by high-priced new cars

PARIS -- Renault Group posted an operating margin of 7.6 percent in the first half of the year, the automaker’s highest ever and already close to its 2025 target, helped by higher prices for its new cars, improved volumes and cost reductions.

The company also returned to a net profit in the six months through June, recording a net income of 2.12 billion euros ($2.35 billion) after posting a 1.68 billion loss in the first half of 2022. The loss was a result of the closure of its Russian operations in the wake of Moscow's invasion of Ukraine.

"These results are the outcome of our continuous efforts to reduce costs over the last three years and of our strategy focused on value combined with the first benefits of an unprecedented product offensive," CEO Luca de Meo said in a statement Thursday. "Our fundamentals have never been as sound and robust."

The previous margin record was set in the second-half of 2017, when it stood at 7 percent. Renault aims to reach an 8 percent margin by 2025 and 10 percent by 2030.

Among vehicles driving the revenue and profit gains was the new Austral compact SUV, which CFO Thierry Pieton said has the highest per-vehicle margin in the company's history.

Automakers’ finances are holding up well despite consumers being hit by a surge in interest rates and high inflation at a time when easing supply-chain woes improve vehicle availability. Stellantis and Mercedes-Benz Group both reported better-than-expected earnings. 

Renault’s order book in Europe is at 3.4 months of sales at the end of June and set to stay above a target of two months through the year, the company said. Sales were up by 13 percent worldwide, and 24 percent in Europe.

De Meo, leading Renault through a turnaround for the past three years, is pursuing a listing of the company’s electric-vehicle and software unit Ampere. The plan is facing some headwinds following aggressive price cuts by Tesla and increasing competition that are weighing on demand for its flagship EV, the Megane E-Tech.

First-half sales of the model reached 23,000 units, Renault said Thursday, with the majority of deliveries of higher-end version of the vehicle. 

Concerns about the sustainability of Renault’s pricing strategy has led to investor pushback on the planned share sale, now more likely to take place in the first half of next year. Still, the manufacturer took a step toward the entity’s initial public offering on Wednesday, when Japanese partner Nissan agreed to spend as much as 600 million euros for a stake in Ampere after months of talks between the two companies. 

The Nissan investment in Ampere is “modest,” according to Stifel analyst Pierre-Yves Quemener, and the IPO plans remain under scrutiny. Renault is proceeding with Ampere’s carve-out, due to be completed later this year.

Renault also is still dealing with some logistics troubles, leaving a high number of cars stranded at factories. Inventory as of June was 569,000 vehicles, slightly down from end-March, and transportation issues should improve during the second half, it said. 

The company remains focused on efforts to produce more affordable EVs, with a target of 40 percent cost reduction on a car-by-car basis in next-generation vehicles by 2027.

Bloomberg and Reuters contributed to this report