Renault SA slumped the most in more than six months on concerns that pricing pressure across the auto industry may derail the French carmaker’s recovery.
(Bloomberg) — Renault SA slumped the most in more than six months on concerns that pricing pressure across the auto industry may derail the French carmaker’s recovery.
The shares fell as much as 7.9% in Paris after Tesla Inc. signaled it’s not done reducing electric-vehicle prices even at the expense of its profit margins. Renault’s peers preparing to introduce more battery-powered models including Stellantis NV and Volkswagen AG also declined.
“There are still concerns over pricing at a time Tesla keeps on cutting prices,” Jefferies analyst Philippe Houchois said. “You can’t isolate what Tesla is doing because it has repercussions on the market.”
Years of supply-chain bottlenecks have left automakers with full order books, yet buyers increasingly struggle with high inflation and interest rates. The recent moves by Tesla — whose Model Y was the top-selling vehicle in Europe last quarter — complicate Renault Chief Executive Officer Luca de Meo’s efforts to keep sticker prices elevated even as parts shortages ease.
Read More: Tesla’s Not Done Cutting Prices as It Protects Lead in EVs making progress
While Renault reported better-than-expected first-quarter revenue and confirmed its full-year outlook, pricing concerns dominated the company’s call on the results. Chief Financial Officer Thierry Piéton fielded several questions on the sustainability of pricing for the €42,000 ($46,091) electric Megane E-Tech hatchback. While overall pricing probably will be “a little softer” in the second half, the CFO said Renault isn’t planning any drastic changes to the Megane’s price tag.
Leasing rates for the EV are competitive, and Renault will accept slightly lower volumes in the short term if needed, Piéton said. “There is no big incentive to go cut the prices and kill residuals and go in a spiral that some of the competition is following.”
Renault will probably end up being forced to reduce prices for its EVs including the Megane E-Tech to generate the volumes it needs to comply with emissions limits in Europe, Bank of America analysts wrote this week. Such a move would have a negative impact on earnings, the analysts said.
Renault said its order backlog in Europe — the company’s main market — was more than three months of sales at the end of March. The metric will remain above the target of two months throughout the year, even with a market 30% below pre-pandemic levels, the company said. Inflationary pressure from high prices for raw materials and energy are likely to ease in the second half, the CFO said.
Earlier this year, de Meo branded Tesla’s aggressive pricing strategy as risky for the nascent EV industry. The manufacturer is pushing ahead with a revamp of its business.
Read More: Renault to Review EV Prices as Tesla Pressure Mounts
Renault is working on reaching a final agreement with Japanese partner Nissan Motor Co. that will allow the companies to rebalance their troubled two-decade alliance. De Meo has pursued the deal as he seeks to split Renault’s businesses and work with new partners amid the industry’s transition to EVs and increasingly sophisticated software.
Talks with Nissan are “constructive,” and Renault is pushing ahead with the carve-out of its EV business, Piéton said. The carmaker still plans an initial public offering of the unit, called Ampere, as early as at the end of this year if the market allows.
(Updates with analyst comment in third paragraph)
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