Renault plans to make €2.5bn cost reduction by 2023

Kumutha Ramanathan
·2-min read
Renault says it wants to move the company from volume to value. Photo: Getty
Renault says it wants to move the company from volume to value. Photo: Getty

Renault (RNO.PA) has laid a business transformation strategy that includes a plan to cut costs by €2.5bn ($3bn) by 2023 for the struggling French carmaker, an increase of €500m from its earlier estimate.

The business is also targeting a €5bn cost cut by 2025.

Chief executive Off Luca de Meo company’s plan as “Renaulution” on Thursday.

The plan includes three phases:

  • Resurrection: running up to 2023, the business will focus on margin and cash generation recovery.

  • Renovation: in the period leading up to 2025, the business will see renewed and enriched line-ups, feeding brand’s profitability.

  • Revolution: from 2025 and onwards, Renault will pivot the business model to tech, energy and mobility.

“The ‘Renaulution’ is about moving the whole company from volumes to value,” said De Meo. He called it a “profound transformation of our business model.”

De Meo said: “We’ve set steady, healthy foundations for our performance. We’ve streamlined our operations starting with engineering, adjusting our size when required, reallocating our resources in high-potential products and technologies.

“This boosted efficiency will fuel our future line-up: tech-infused, electrified and competitive. And this will feed our brands’ strength, each with their own clear, differentiated territories; responsible for their profitability and customer satisfaction. We’ll move from a car company working with tech to a tech company working with cars, making at least 20% of its revenues from services, data and energy trading by 2030.”

WATCH: Renault, BMW and VW reveal 2020 sales declines

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The company said it will target to reach more than a 3% group operating margin by 2023 and a return of at least 5% two years later. This is in contrast with 4.8% margin in 2019, prior to the knock-on effect of the COVID-19 pandemic on the business’ major losses.

De Meo joined the business six months ago from Volkswagen and faced the major challenge of reducing record losses at Renault following declining vehicle sales from the pandemic as well as consumer appetite shifting to electric vehicles.

His tenure marks a shift for the business, four years after former boss-turned-fugitive Carlos Ghosn had unveiled an expansion outlook for Renault, which was based on expanding car volumes globally.

The group is likely to exit some unprofitable countries or markets, according to Reuters.

The ailing carmaker has been trying to get a partnership with Japan’s Nissan (NSANY) to regain its footing.

WATCH: Renault, BMW and VW reveal 2020 sales declines