Renault expects profitability to decline this year as the automaker rolls out lower-priced electric models, including the Twingo and grapples with rising competition in Europe.
The French manufacturer sees an operating margin of around 5.5%, it said Thursday. That’s below analyst projections and compares with 6.3% last year.
Renault, which plans to expand in Latin America and Asia, proposed a flat dividend of €2.20 (around R42) a share.
Chief Executive Officer Francois Provost has walked back several decisions by his predecessor, Luca de Meo, to cut costs.
He’s reintegrated Renault’s EV and software arm Ampere, discontinued some mobility businesses and slashed costs at the Alpine sports-car brand.
The moves are meant to make the company leaner amid mounting competition from Chinese manufacturers in Europe.
“We changed what is needed in this very disruptive environment,” Provost said in an interview with Bloomberg Television.
Lowering expenses will remain a priority this year. Renault plans to reduce variable costs per vehicle by around €400 (more than R7,500) annually through improving technology and collaborating more closely with suppliers.
There was some good news from Alpine, which more than doubled registrations to over 10,000 units last year.
Still, Renault sees automotive free cash flow declining to around €1 billion (around R19 billion) in 2026, from around €1.5 billion (R28 billion) last year.
The international expansion and selling more EVs will dilute margins, the company said.
The pricing environment will be complicated this year, Chief Financial Officer Duncan Minto said on a call with reporters.
Renault shares fluctuated at the open and were up 0.7% as of 9:10 a.m. in Paris. The stock is down roughly a third in the past year.
For the medium term, Renault targets an operating margin of between 5% and 7% and automotive free cash flow of at least €1.5 billion (R28 billion) on average.
The targets show ambition, Bernstein analysts led by Stephen Reitman said in a note.
“Renault is providing one of the more robust responses” in Europe to the threat from Chinese automakers, the analysts said.
They cited smart new takes on classic models like the R5 and the company’s efforts to match faster Chinese vehicle development.
Meanwhile, the carmaker is pushing into drone manufacturing as a way to fill its French plant of Le Mans and contribute to the country’s defence efforts at a time of heightened geopolitical tensions.
Provost will present his new strategy at a capital markets day on 10 March at the Technocentre complex in Guyancourt design centre outside Paris.
“Over the past five years, we succeeded in our recovery in Europe,” Provost told Bloomberg TV. “Now it’s time to push outside Europe.”
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