Renault’s chief operating officer Patrick Pelata talks exclusively to just-auto about the company’s alliance with Daimler, the market in Europe and the rest of the world as well as the company’s future in Formula One.
Crisis, what crisis? 2010 could end up a record year for Renault despite disappointing sales in its European heartland. Sales elsewhere around the world have more than compensated.
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Chief operating officer Patrick Pelata said: “When we come to add up the figures at the end of the year we are likely to be showing record sales numbers. Although Europe has been down we have seen strong growth in Brazil, Russia, North Africa and Turkey as well as in other Latin American countries including Mexico.”
Pelata is not expecting an easy ride next year, however. Price pressure is what concerns him most. Like many carmakers he is concerned that overcapacity – or making too many cars – in Europe will make rivals reduce prices in order to sell their vehicles.
He said: “We have made some significant moves to reduce capacity, we are running only single lines at all our plants and we are down to one shift at our Spanish factories.
“So we are adapting our capacity according to demand and we have also reduced our manufacturing fixed costs by around 10 percent compared with before the economic crisis.”
Pelata is also concerned by upcoming emissions regulations which could drive up the cost of diesels in particular once Euro 5, then Euro 6 legislation comes into force.
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By GlobalData“We are working on solutions with Alliance partner Nissan on new petrol engines that will bring the average price of our engines down and you will see these a year from now. We are only interested in putting technologies into our cars that customers are ready to pay for – this fits with our vision of sustainable mobility for all.
“In terms of legislation, the EU needs to prioritise. Purchasing power is diminishing, and even before the economic crisis it was going down. All carmakers and legislators have to face that fact.
“For many the only solution is downsizing or changing to brands like Dacia. The EU has to prioritise rather than trying to enforce rules covering many different areas. If it’s C02 then good, let’s all work on that.”
Despite being alliance partners, Renault and Nissan are taking a different approach to electric vehicles with Renault leasing batteries to keep purchase costs down while Nissan will sell them – making the Leaf expensive at GBP28,950, although government incentives in Britain will bring this down by GBP5,000.
Pelata is convinced that renting batteries is the way to go although he says Renault will sell batteries if that is what customers want.
“Batteries are expensive and they also have a significant value after they have been used in a car. That is an equation that still has to be worked out. But we are pricing our EVs at the same level as current diesel engine models, net of government incentives, while the rental cost of batteries plus electricity will work out less than the cost of diesel or petrol as long as you are doing between 12,000 and 15,000 miles a year.
“We think it will be easier to mass market the cars this way. We are not looking to sell our cars to an elite few who can afford them. We are a mass market brand.”
Pelata describes the technology cooperation agreement signed between Renault, Nissan and Daimler as “more important that the original alliance between Renault and Nissan 10 years ago.
“The automotive landscape has changed not just because of the economic crisis but because of globalisation, technological requirements, safety and emissions legislation as well as the pressure on price. Economies of scale are now even more important and this is why we are seeing an acceleration of synergies.
“Renault is not a big carmaker. We will have around 2.5 million sales in 2010, and the development of new products and our zero emission vehicles puts pressure on our research and development budget. Daimler is big by turnover and market capitalisation but Audi is getting closer all the time.
“If you put the budgets of Renault, Nissan and Daimler together you get by far the largest R&D capability in the industry. Bigger than GM, bigger than Ford so we will be able work together to enjoy the best technologies. The main thing is to ensure we realise our full potential.
“So far the alliance with Daimler is working very well. We are already working on the next generation of Smart cars and the Renault Clio as well as EVs and light commercial vehicles.”
Renault has other partners as well. Dacia in Romania which makes the low-cost Logan, Samsung in South Korea, where the company’s off-road and large car development is taking place, and the giant AvtoVAZ carmaker in Russia.
AvtoVAZ, which makes Lada cars, is the top-selling brand in Russia although the market there has been extremely depressed over the past 18 months.
The introduction of government sales incentives on domestically-built vehicles, has boosted the market, however.
Pelata said that Renault’s other Russian operation, AvtoFramos, a joint venture which the Moscow city authorities, which produces the Logan is selling all it can produce, but the big project is AvtoVAZ which joined the Alliance almost three years ago, just before the collapse of sales in the country.
Pelata said: “There was a lot of scepticism about AvtoVAZ when we took a 25% stake but the vision is now becoming clearer. We need to ensure that we can support the top management in transforming the company. We have done it before, Renault with Dacia in Romania and Nissan with Dongfeng in China, so we have the experience.
“As for the economic crisis and the fall in the Russia market, well – crises are good because they allow you to do difficult things. We have also had strong support for what we are doing at AvtoVAZ from the prime minister Vladimir Putin.
“Renault, Nissan and AvtoVAZ are working together on common technologies, platforms, plants, purchasing and suppliers. The Russian company also gives us a 40% share in one of the fastest-growing markets in the world. Renault and Nissan do not have that anywhere else.”
Elsewhere in the world Renault is still working with its Indian partner Bajaj on a low-cost model but has abandoned plans to produce a rival to Tata’s Nano, envisaged as a USD2,000 low-cost car to entice people off two wheels onto four.
“We came up with a really nice car but having looked at the development and production costs, and at the sales performance of the Nano, we decided we could not keep the cost as low as we wanted.
“Potential customers are the lower to middle classes who are still using motorcycles, but they still do not seem to be able to afford the Nano. Most of the sales of the Tata as far as we can see are second vehicles in the household.
“We are now supporting Bajaj on another project which will be cheaper and more simple. It may be a long process but we are not in a hurry.”
Pelata also said that Renault will continue to be represented in Formula One despite rumours of the company selling its stake in the Renault F1 team.
He added: “There are many discussions going on in F1 but one way or another we will be there next season supporting Red Bull and (or) the Renault F1 team. We are very happy to be competing and the Renault brand is steeped in racing and I believe it does have an effect on our image.
“It shows we have the ability, quality and reliability to compete with the likes of Ferrari or Mercedes.”
Chris Wright
