2023-04-20 09:25:00
(BFM Bourse) – The diamond manufacturer has published a sharp increase in turnover, driven by price increases and recently launched vehicles. But the market is worried about the very aggressive strategy of Tesla, which is still considering cutting its prices.
Renault’s sales are buoyant, fears of a “price war” occupy the minds of investors. The diamond group published its turnover for the first quarter on Thursday, which came out well above expectations.
The revenues of the company headed by Luca de Meo increased by 29.9% over one year – excluding Russia, from which Renault left in May 2022 – to settle at 11.5 billion euros, which is clearly higher than the 11.1 billion euros expected on average by analysts. The automotive group was driven by price increases, which had a positive impact of 9.7 percentage points on revenue (or 760 million euros).
In fact, the company benefits from the price increases it passed at the end of last year. Volumes contributed 18.6 percentage points. The other favorable wind comes from the “mix” ie the fact that the sales of the groups are turned towards more expensive models. This “mix” effect had an impact of 5.2 percentage points thanks to recent launches, namely the Dacia Jogger, the Renault Austral and, above all, the Megane E-Tech, the company’s flagship vehicle which embodies both its know-how in electrics and its offensive on the C segment, that of compact minivans, much more profitable than the B (sedans).
But these good figures are hardly welcomed by the market. On the contrary, Renault is suffering on the Paris Stock Exchange, its share falling by more than 7% around 11 a.m., the largest drop in the CAC 40 and the SBF 120.
The publication of the diamond group is not in question. Moreover Stellantis lost 4.4% on the Paris Stock Exchange and Volkswagen lost 3% in Frankfurt, stressing that the entire automotive sector is under pressure.
“Renault may publish good figures and make reassuring remarks, the market retains Tesla’s aggressive price cuts and relegates the group’s sales and the reassuring dynamics of the Megane E-Tech to the background”, explains Michael Foundoukidis, analyst at Oddo BHF.
Tesla sacrifices its margins
“Renault’s figures are not bad and are even higher than expected. What weighs on Renault shares is the uncertainty linked to its ability to withstand the price war launched by Tesla, which is cutting its prices at the continuation of the increase in its production capacities. The publication of this Thursday does not really provide an answer on this subject”, confirms Valentin Mory, analyst at the independent research office AlphaValue.
Tesla has implemented a strategy of brutal price cuts since the end of 2022 in China and the beginning of 2023 in the United States and Europe, reducing in many waves the prices of its flagship vehicles, such as the Model Y or the Model 3. To the point that this latest model is now in the price range of the Megane E-Tech (42,000 euros) or even below.
However, Elon Musk, CEO of Tesla, made it clear to financial analysts that the group was considering lowering prices even further. “We are of the opinion that it is better to increase volumes and increase the fleet than to reduce volumes and increase margins,” he said on Wednesday evening during the presentation conference. Tesla’s quarterly results.
“Renault’s Megane E-Tech is really in front of Tesla’s Model 3 and Y, it is thus in competition with the entry-level of the American manufacturer. Renault will have to be convincing enough at the consumer level to justify a price superior for its Megane E-Tech to that of the Model 3”, underlines Valentin Mory.
“The market scares itself by fearing that Tesla’s price cuts will affect Renault or Stellantis. But this reasoning is questionable because Tesla and these manufacturers are in related market segments but not dependent on each other”, nuance for his part, Jean-Louis Sempé of Invest Securities.
A risky strategy for Tesla
Still, Tesla’s desire to sacrifice profitability for the benefit of volumes obviously carries its share of risks. The figures published Wednesday evening by the manufacturer specializing in electric attest to this: if its turnover increased by 24% in the first quarter, its operating margin fell from 19.2% in the first three months of 2022 to 11.4% a year later. And its earnings per share collapsed by 24%. Besides, Wall Street does not like this publication, Tesla shares falling 7.7% in pre-opening trade.
“Tesla’s strategy is dangerous for the consumer, because by suddenly lowering the prices of new vehicles, you also destroy the residual value of the vehicle, or the resale price. Which also translates into tighter financing conditions for the car. ‘buyer’, develops Jean-Louis Sempé.
Another financial intermediary points to “a dangerous spiral” which can create a wait-and-see attitude among consumers: why buy a vehicle today whose price could drop in a few months?
Faced with Tesla’s violent strategy, Renault wants to be reassuring. The financial director, Thierry Piéton, indicated that the group had no intention or to carry out “drastic” price cuts on its Megane E-Tech. He also explained that the impact of price increases on the group’s sales should certainly fade from the second half, but would continue to be positive.
“Even in the event of a drop in its prices, Renault benefits from the recent arrival of new models, such as the Austral and, therefore, the Megane E-Tech, and will benefit from the next favorable launches via the mix effect, which will its turnover”, emphasizes Jean-Louis Sempé.
Renault will notably launch the new Espace (in June), the new Clio (in the third quarter), or even the Renault 5 in 2024. Dacia, for its part, will market a new Duster next year before the Bigster, an SUV, in 2025.
Julien Marion – ©2023 BFM Bourse
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