French automaker Renault has announced a sweeping overhaul on Tuesday in a bid to attract investors as it expands its electric vehicle business amid an accelerating market.
Under the green revamp, Renault is to split its operations in two, with a new electric vehicle unit and a subsidiary for petrol, diesel and hybrid cars that will pair up with China’s Geely.
The carmaker’s flagship division following the reorganisation will be Ampere, which aims to produce a million electric vehicles by 2031, the group said ahead of an investor day in Paris.
The new division will employ around 10,000 staff in France.
Renault is the latest automaker seeking to finance a shift towards electric.
The market for the greener vehicles is expected to grow rapidly in response to consumers’ worries about climate change, putting pressure on manufacturers to develop less polluting products.
The European Union last month agreed to phase out new CO2-emitting vehicles by 2035, a move set to turbo-charge the production of electric prototypes on the continent.
Renault follows the likes of US automaker Ford and Germany’s Volkswagen.
The latter launched its premium sports brand Porsche on the stock market in September to finance its investment in electric, connected and autonomous cars.
Ampere will produce the new Renault 5 and Renault 4 among other models in northern France and will target more than 30-percent growth annually over the next eight years and to break even by 2025.
Renault said it would list Ampere on the Euronext Paris stock exchange in the latter half of 2023 and invite investment but will retain “a strong majority”.
The group — in which the French state and carmaker Nissan each own 15 percent — has still to outline the part that its Japanese partner will play in the new electric division.
– Financing electric drive –
For hybrid and internal-combustion vehicles, Renault plans to combine its technological, manufacturing and research and development activities with Chinese automaker Geely.
The 50-50 partnership with the Chinese group — owner of Volvo — will develop and produce engines, gear boxes and other components for hybrid and petrol and diesel vehicles.
It will employ 19,000 people across Europe, China and South America, and have 17 factories and five research and development centres.
Turnover for the division is expected to grow by four percent by 2027, the group said.
“We are designing an agile and innovative organisation to manage the volatility and accelerated technological evolution of our time,” said Renault chief executive Luca de Meo.
The group aims to see an operating margin — a key profitability yardstick — of above eight percent in 2025.
Shares in Renault fell on the Paris exchange shortly after trading began on Tuesday, before regaining ground by mid-morning.
The group’s financial targets are “more ambitious than expected” but “raise questions”, analyst Tom Narayan of RBC said.
The company suffered a historic loss in 2020 due to the Covid-19 pandemic and its recovery was destabilised by its withdrawal from Russia following Moscow’s invasion of Ukraine.
In late July, Renault said that its decision to quit the Russian market had pushed it deep into the red in the first half of 2022.
Two months earlier, it had sold its 100-percent stake in Renault Russia and its 68-percent stake in AVTOVAZ.
But with its new revamp, Renault said it planned to resume paying shareholders a dividend next year for the first time since 2019.
The value of traditional car manufacturers pales in comparison to new players on the market specialising in electric vehicles such as Elon Musk’s Tesla or Chinese firm BYD.
US giant Ford has taken similar steps, announcing the creation of the “Model E” electric subsidiary earlier this year.
Renault’s sales of traditional internal-combustion vehicles are falling.
In the first nine months of 2022, hybrid and electric vehicles represented 38 percent of the brand’s registrations in Europe, a year-on-year increase of 12 percent.
The separation of Renault’s electric and conventional production has concerned trade unions after several waves of job cuts.
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