Renault to split in five businesses in sweeping overhaul plan

Renault announced a major overhaul that will see it separate its activities in five businesses, deepen ties with China's Geely and spin off its electric vehicles unit through a stock market listing next year.

The automaker set an 8 percent operating margin goal for 2025, which would increase to more than 10 percent in 2030, from 5 percent expected this year. It also aims for an operating cash flow of more than 2 billion euros a year between 2023-25 from more than 1.5 billion this year, rising to more than 3 billion euros in the following five years.

Dividend payments will resume next year after a three-year hiatus as turnaround efforts take hold, Renault said on Tuesday during an investor day.

CEO Luca de Meo, who took over a struggling Renault in 2020, has embarked on a radical overhaul of operations as the automaker seeks to navigate the difficult and costly transition to electrification.

The main plank of the automaker's strategy is separating its combustion engine business -- which will be housed in a 50-50 joint venture with Geely -- from its electric vehicle unit, to be listed in the second half of next year. The move is expected to help Renault raise funds for EV development and technology and narrow the gap with bigger companies such as Stellantis.

Renault is reorganizing into five different units spanning electric cars, combustion- and hybrid-engine assets, the Alpine sports-car brand, financial services and new mobility and recycling businesses.

"We are creating independent businesses, focused on structurally more profitable activities, open to external investments, each of built around an indigenous set of technologies," De Meo said.

Using a sports metaphor, he compared the "old" Renault to a pentathlon athlete who would struggle to win gold medals in all five sport specialties.

By partnering in each of its new 5 businesses with the best available partners, "Renault hopes to win medals in those different sports instead of remaining at an average level in all 5," he said.

The two most important steps relate to the automaker's EV and combustion-car divisions, named Ampere and Power. 

For Ampere, the company is seeking external investors. It’s also weighing an initial public offering on Euronext Paris in the second part of 2023, at the earliest. Renault plans to keep a "strong majority" in Ampere and is counting on the support of potential cornerstore investors, such as Qualcomm.

Renault is aiming for a roughly 10 billion euro valuation for Ampere, people familiar with the situation have said.  That valuation would top Renault’s current market value of 9.4 billion euros. The target is aspirational and the IPO will be subject to market conditions, the people said.

The business will have a lineup of six electric cars before the end of the decade and plans to make about 1 million EVs annually for the Renault brand by 2031. 

Renault's carve-out push has been at the heart of tense talks with Nissan this year as the two companies seek to reshape a two-decade-old alliance that has been problematic since the 2018 arrest of former leader Carlos Ghosn.

The valuation of Ampere has been among sticking points in the discussions, as well as Nissan's intellectual property concerns about sharing intellectual property with others, including a Chinese rival like Geely, people familiar with the talks have said.

De Meo said Renault would have more to say on the alliance  when it was ready, and that -- as in a marriage -- Renault needed to have its "own life."

"Like even in a marriage, it is important for us to have our own hobbies and our own life," he told investors.

The talks have one week remaining to meet a Nov. 15 target the companies had set to reach a deal, according to sources.

Nissan talks continue

Nissan said it was deepening its reflection on how Renault's new electric vehicle business could be beneficial for the Japanese automaker and how it would participate.

"We are considering to invest in the new Renault EV entity subject to the outcome of the discussions," Nissan said in a statement on Tuesday.

Discussions over a new governance structure for the alliance were also continuing, it said. The discussions are going in the right direction and we will take the necessary time to build this new chapter of the Alliance," Nissan said.

Alpine may launch in U.S., China

Renault will push to broaden the appeal of its boutique Alpine brand, which is set to develop a new lineup to include hatchback and crossover models, as well as targeting further segments.

Renault expects half of Alpine’s growth -- the unit sold 784 cars during the third quarter -- to come from new markets including potentially North America and China.

Reuters and Bloomberg contributed to this report