Blog: Dave LeggettRenault Laguna hard lesson

Dave Leggett | 30 July 2009

We have been in the thick of the second quarter companies' results season and it has been pretty absorbing.

In Europe, Volkswagen did well, its global footprint helping it to ride the recession. Fiat did slightly worse than expected, but not that bad. Daimler sees chinks of light. BMW is facing a slight wobble this week, though it could be much worse ('it could be worse' must be something of a mantra among CEOs).

But the Frenchies – PSA and Renault – will probably want to forget 2009 as soon as they can. Renault, in particular, posted a Q2 stinker. Why so? Well, some of the cars just ain't selling. Renault had a very bad first half for sales in Europe. The Laguna, first half production volume down almost 60% on last year, stands out.

If you recall cars like the Vel Satis and Avantime, they had a certain something. The Vel Satis had a quality interior and the audacious Avantime was a rather stunning design – MPV meets sports coupe; mad but true.

But selling large Renaults is a big ask outside of France. The executive segment everywhere is very, very competitive. And the premium brands have muscled in to take more and more D/E-segment customers, who used to go with the volume makers, away. Remember the Ford Scorpio? Ford saw the writing on the wall and dropped it. Ford Mondeo was squarely targeted at fleets and the traditional D-segment customer and not aimed at the retail buyer aspirational set.

The latest Laguna has not been cutting the sales mustard. It cost quite a bit to develop and there's not much of a return on that investment in prospect. It may well be a nice car, but that's not the point.

As a Renault it is seen as a poor relation to the premium marques. The private retail buyer would rather have a BMW or Mercedes and those brands have become a lot more affordable and less exclusive over the last ten years. In these hard recessionary times, maybe the punters are even less likely to stray from the strictly conventional.

And the established gorillas in the fleet market can cane Laguna because, well, it's a Renault and not a bulk-buying, low-cost but reliable fleet staple like a Ford Mondeo. Renault residuals never quite rocked, however hard Renault tried with product. And Renault decided therefore that that was a part of the market it would back away from. The poor old Laguna has been squeezed at both ends.

Should Renault even try to do big cars? It's an interesting debate. Big cars equal large margins. If you can elevate your product mix into the upscale area, you're going to make better profits.

Carlos Ghosn knows that well, and that was his plan with Renault. There were to be flair designs that would help to achieve that. Renault would be a premium-volume brand, best of both worlds with French design flair that could carry it off, allied to a bit of alliance industrial muscle underneath. Trouble is, the market just would not buy the premium part of that. And you have to listen to the market, even if you don't like what it tells you and you insist that the market is being irrational.

If it wants to be irrational, it will. And you will still have to stand there and justify your strategy to the board and shareholders when you have lost a packet.

We may well be seeing the beginning of the end of Renault large cars. I can't see Renault doing another Laguna after this sorry saga. What do you say to that Carlos, me old bean, me old China? I think I know what he would say: the future, my friend, is electric.

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