Renault’s chief executive has criticised Tesla for cutting electric vehicle prices, warning it destroys value for customers, as the French carmaker announced a doubling of profit margins last year.
Luca de Meo said the US electric-car maker’s constantly fluctuating prices, including the latest cut last month in the US, Europe and China, damaged customer confidence in the value of their vehicles.
“I hope that they [Tesla] continue to reduce to zero, but we will continue to protect the value of our electric vehicles,” he said. “This is destroying value for the customer, for sure, when you do this.”
Tesla’s price reductions have sparked complaints from customers who had already bought vehicles at higher prices and saw their cars lose significant value overnight.
De Meo made the Tesla comments after Renault said operating margins had risen to 5.6 per cent in 2022, more than double the 2.8 per cent in 2021, while cash flow hit a record following a €3bn turnround to cut costs.
The numbers on margins beat forecasts, which were raised last summer, as the carmaker hit its turnround target three years earlier than planned.
“Now, we are out of the emergency room and back in the game, now we are ready to race,” de Meo said. The company’s “fundamentals have been thoroughly cleaned up and there will be no turning back”.
Although the group slipped into a €700mn net income loss last year, pre-tax profit, excluding losses from its withdrawal from Russia, jumped from €549mn to €1.6bn, while revenues rose from €41.7bn to €46.4bn.
In May, Renault wrote off €2.3bn from selling its Moscow plant and stake in Russia’s Avtovaz following the invasion of Ukraine.
The group’s free cash flow also reached €2.1bn last year, beating the market consensus prediction of €1.68bn.
De Meo’s criticism of Tesla follows the company’s step up in its electric car sales. It is now the third-largest electric car brand in Europe, and second for hybrids behind Toyota.
As well as launching a €3bn turnround drive, Renault has focused on selling higher margin vehicles, relaunching larger cars and ditching its previous strategy of trying to grow sales at all costs.
The company has “more than compensated the shock” of its Russian exit, de Meo said.
When he joined the business in 2020, it had lost €8bn in six months, and many people thought its prospects were “hopeless”, he added.
More than 40 per cent of its sales last year were of larger vehicles with higher margins, while seven in 10 cars were high-specification versions, with added features and a focus on luxury.
Despite growing economic headwinds, Renault expects to post a margin of at least 6 per cent this year and produce about or above €2bn of cash. It will pay a dividend of €0.25 a share.
Renault had a three-and-a-half month order book in Europe at the end of the year, another record for the company.
Carmakers all over the world have experienced longer waiting times for their vehicles because of a global shortage of semiconductors, which is slowly beginning to ease.
The company “still faces a relatively challenging environment”, with shortages of chips, higher costs and logistics issues, de Meo said.
But he thinks the company “has the potential to be an anti-cyclical player”, increasing profits and raising pricing in the coming year.
