Renault will split into 5 activities for the sake of profitability

  • Renault will split into five major overhaul activities
  • To form joint venture with Geely, spin off EV unit
  • Shares fall due to lack of progress in talks with Nissan

PARIS, Nov 8 (Reuters) – French carmaker Renault (RENA.PA) has announced a major overhaul that will see it split its business into five businesses, deepen its ties with China’s Geely and divest its electric vehicle unit via an IPO. on the stock market next year.

Renault, ahead of a long-awaited investor presentation on Tuesday, said it was targeting operating margins of 8% for 2025 and rising to more than 10% in 2030, from an expected 5% this year.

It also plans to restore dividends from 2023 after a three-year hiatus and generate over €2 billion in cash per year between 2023 and 2025, rising to over €3 billion over the five years. following.

A pioneer in the race for electric cars, Renault has fallen behind new rivals like Tesla. After needing emergency cash from the state during the COVID pandemic, the group is looking to extend its recovery from losses in 2019 and 2020, and increase the valuation of its various parts.

But big question marks remain over its strained relationship with longtime Japanese partner Nissan, as Renault seeks other outside investors for each of its divisions.

The main element of the automaker’s strategy is to separate its combustion engine business – which will be housed in a 50-50 joint venture with Geely, also announced on Tuesday – from its electric vehicle unit, which will be listed in the second half of the year. next year. .

Nissan (7201.T) is expected to take a stake in the EV business, codenamed “Ampere”, alongside other investors, although Renault will retain a majority stake.

Talks with Nissan are dragging on amid Japanese reservations about sharing the technology with others, including a Chinese rival like Geely, sources told Reuters.

Renault shares fell more than 4% on Tuesday as it gave few details on the status of talks with Nissan over the future of their partnership.

Renault CEO Luca De Meo said the group wanted to give the alliance a strong future and a “new chance”. But he also said that – like in a marriage – “it’s important for us to have our own hobbies and our own lives”.

The talks have a week left to meet the November 15 target the companies had set for reaching an agreement, according to people familiar with the talks.

Besides the Ampere EV unit and the combustion engine business, called “Horse”, Renault will have three additional businesses – the Alpine sports car brand, financial services and new mobility and recycling businesses.

“We are building independent companies, focused on structurally more profitable businesses, open to outside investment, each built around a set of indigenous technologies, De Meo told investors.

Using a sporting metaphor, he compared the “old” Renault to a pentathlon athlete who would struggle to win gold medals in all five sports specialities.

By teaming up in each of its 5 new activities with the best partners available, “Renault hopes to win medals in these different sports instead of remaining at an average level in the 5”, he said.

Report by Gilles Guillaume; Written by Silvia Aloisi; Editing by David Evans

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