Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Renault SA (RNLSY) achieved a record operating margin of 7.6% in 2024, the highest in its 126-year history.
• The company generated almost 3 billion in free cash flow, contributing to a net cash position of over 7 billion.
• Renault SA (RNLSY) successfully launched 10 new cars in 2024 without any quality issues, showcasing its operational efficiency.
• The Renault brand improved its market position in Europe, moving from fifth to third place, with over 1 million sales per year.
• Renault SA (RNLSY) is making significant strides in electrification, with nearly 33% of its European passenger car sales being electrified in 2024.

Negative Points

• Renault SA (RNLSY) faces challenges with CO2 compliance and potential penalties in 2025, impacting its financial outlook.
• The company is experiencing a buildup in dealer inventory levels, which could affect future sales and cash flow.
• Renault SA (RNLSY) is behind in BEV (Battery Electric Vehicle) sales compared to competitors, which may impact its market share.
• The company is dealing with negative currency impacts, particularly from the Argentinian peso and Turkish lira devaluations.
• Renault SA (RNLSY) recorded a significant capital loss of 1.5 billion from the disposal of Nissan shares, affecting its net income.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with RNLSY.

Q: Can you elaborate on Renault's strategy for CO2 compliance in 2025 and beyond, particularly regarding BEV sales targets and the decision not to participate in pooling? A: Luca de Meo, CEO, explained that Renault aims to achieve CO2 compliance through its own efforts rather than pooling, as paying competitors is not ideal. Renault plans to increase BEV sales to 20-22% of its mix in Europe, leveraging new models like the Renault 5 and 4. The company is focused on reducing costs and maintaining pricing to avoid destroying long-term EV market value. Flexibility in regulations is also sought to avoid negative impacts on the industry.

Q: What are the future collaboration opportunities with Geely, and how does this affect Renault's partnership with Nissan? A: Luca de Meo stated that Renault sees strategic alignment with Geely, particularly in technology and market vision. The partnership has been successful in Korea and with the Horse project. Renault is open to further collaborations, including in Brazil, and aims to maintain operational flexibility without capital ties. The partnership with Nissan remains strong, with ongoing projects and potential new initiatives.

Q: How does Renault plan to manage the impact of the 1% operating margin reduction due to CAFE regulations? A: Thierry Pieton, CFO, clarified that Renault's plan includes incentivizing EV sales and reducing ICE vehicle volumes to manage the CAFE impact. The 1% margin reduction is primarily due to these strategic adjustments, with no penalties or supplier compensations included. Renault assumes current CAFE rules will remain unchanged for 2025.

Q: Can you discuss the potential for local production partnerships with Chinese EV players in Europe, particularly with Geely? A: Luca de Meo mentioned that while there are no current plans for local production partnerships with Geely in Europe, Renault is open to exploring opportunities. The focus is currently on Latin America, but the successful collaboration with Geely in other regions suggests potential for future projects.

Q: What are Renault's expectations for the European action plan for the auto industry, and what changes would you like to see? A: Luca de Meo expressed a desire for regulatory flexibility, particularly regarding 2025 CAFE targets, to allow time for new product introductions and market adjustments. He also emphasized the need for a pan-European approach to EV subsidies and competitiveness improvements, such as reducing energy costs for production.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.