"Value over volume" is Luca de Meo’s rallying cry in his plan to revive Renault. It’s a formula that has worked for crosstown rival PSA Group under Carlos Tavares, and even premium automakers such as Mercedes-Benz are now preaching a similar philosophy.
But the task at Renault will not be easy, following years of a volume-based strategy under Carlos Ghosn, who argued that global scale was necessary to wring synergies, largely in purchasing, out of his mostly mass-market Renault-Nissan Alliance. Ghosn’s 2017 plan to increase alliance sales by 40 percent by 2022 – to a total of 14 million worldwide – has been abandoned, and now Nissan and Renault executives say they envision at least a 20 percent cut in production.
In its place at Renault is a focus on profits, especially by improving pricing, through selling more cars in higher-margin segments and trim levels.
Renault may dominate the small-car segments in Europe with the Clio, Captur and Dacia Sandero, de Meo says, but real profits will come only when it can compete with Peugeot (and Volkswagen) in the compact segments, especially in SUVs.
In an interview with Automotive News Europe, de Meo said he planned to attack the volume/value issue from a number of angles, including product, pricing and performance incentives.
"In France, clients are ready to pay the price for the right content, especially in segments where we are good," he said. "The problem is that we are not performing very well in the C segment" -- where, he said, "you have volume and margins at the same time."
Until a product line revamp, likely to take several years, Renault will have to chip away at buyers’ expectations of big discounts – and it is not the only brand that could improve in this area, analysts say.
"We have some brands chronically operating on 30 percent discounts," Arndt Ellinghorst of Bernstein said in a recent interview, without referring specifically to Renault. "It's impossible to generate sustainable profits on this."