William Malcolm

Renault Warns Of Rough Year Ahead After Record Loss

Renault’s French carmaker has a record loss of eight billion euros (207.2 billion CZK) last year due to a pandemic. In the second half of the year, however, the situation began to improve, the company said today. Due to anti-pandemic closures, the company produced less, which also affected the Japanese partner Nissan. The group did not provide a forecast for this year but said it would achieve the planned cost reduction of two billion euros in advance, probably this December.

According to Refinitiv, analysts expected a loss of 7.4 billion euros. The group had a loss in 2019, namely 141 million euros.

Chief Luca de Meo, who has been running the company since last July, is trying to make a turnaround, including abandoning a long-term strategy of global expansion and focusing on selling more expensive cars to boost profitability.
Following the price increase for some car models, the group’s operating profit, which was negative for the entire year, improved in the second half of the year, reaching EUR 866 million during the period.

“The year 2021 will be difficult because the health crisis involves many unknowns, and also due to the lack of supply of electronic components,” the head of the company recalled the global shortage of chips for the automotive industry. According to Renault, this problem will culminate in the second quarter, and the carmaker’s production may be reduced by about 100,000 cars.

The lack of chips has already forced a reduction in Ford, Toyota, Fiat Chrysler, and Nissan production. Volkswagen also warned that problems with chips’ supply could hurt output at some of its factories this month.

Renault is reducing jobs and reducing cars’ supply, which allows it to reduce costs in areas such as research and development. The French carmaker was struggling with declining sales even before the pandemic than some of its competitors. After years of global expansion, it is now focusing on profitable markets.

As for the lack of chips, their manufacturers prefer consumer electronics producers to car manufacturers, mainly because their orders are more significant than other car manufacturers’. Car manufacturing is also a business with lower margins, so carmakers are not so quickly willing to accept higher chip prices because it could negatively affect their profitability.