Renault Group's Global Sales Fall 8.0% Y/Y in February on European Collapse

Renault has announced that its global light-vehicle sales have fallen during February for the second month in succession. According to figures published by the automaker, sales during the month reached 196,447 units, down 8.0% year-on-year (y/y), made up of 169,087 passenger car units (-8.1% y/y) and 27,360 units (-7.4% y/y) of light commercial vehicles (LCVs). From a brand perspective, the core Renault unit unsurprisingly had a great deal of influence over the declines, down 8.3% y/y as sales reached 163,869 units. Its most important models, such as the Twingo, Clio and Mégane, went into freefall. However, its South Korean brand Renault Samsung witnessed an even more torrid month in which its sales fell by one-third from 9,264 units to 6,184 units. Only its low-cost Romanian brand Dacia was on hand to offer some respite, up by 3.1% y/y during the month as minor improvements in the demand for passenger cars and LCVs were seen.

The decline in its global light vehicle sales this month was entirely caused by the collapse in demand in the important European market. Sales here fell by 21.4% y/y to 106,858 units, as demand in the region's largest markets all contracted on the back of weak sentiment. This included its domestic market, France, where demand tumbled 24.0% y/y to 51,757 units; Germany, where sales fell 18.7% y/y; Italy, where sales declined 20.1% y/y; and Spain by 9.3% y/y. Matters were also not helped by its recent decision to cut its vehicle portfolio and the number of dealers in the UK in response to lacklustre demand (see United Kingdom: 20 December 2011: Renault to Cut UK Vehicle Range and Dealers, Will Launch Dacia Brand in 2012), and during the first month of this new strategy, sales fell by 21.7% y/y. However, there was far more positivity in other markets around the world. The group's second largest market, the Americas, rose 8.9% y/y, as despite falls in North America, the important markets of the South such as Brazil and Argentina offered gains of 25.3% y/y to 16,132 units and 13.1% y/y to 7,618 units, respectively. Its Asia-Africa regional market came in third with sales of 23,556 units, up 23.0% y/y, as despite a 30.5% y/y fall in South Korea, demand almost doubling in Iran from 5,088 units to 10,101 units, a 31.4% y/y gain in China and its entry into India have all helped matters. Sales in Renault's Euromed region have grown by 9.7% y/y, where Algeria became the region's largest market for the automaker, sales rising 37.0% y/y this month to 8,312 units as Turkish demand fell by 20.8% y/y to 7,757 units. Other North African markets also presented improvements, while Romanian sales remained relatively flat. Finally, the automaker's Eurasia region recorded a sales improvement of 28.3% y/y to 13,957 units, heavily influenced by the Russian market where sales increased by 28.9% y/y to 12,870 units.

The decline in global demand this month has now resulted in Renault's light-vehicle sales remaining restricted after the record performance achieved in 2011, and its year-to-date (YTD) now stands at 390,815 units, a decline of 8.2% y/y.

Outlook and Implications

While Renault has sought to reduce the influence that the European market has on its business, the recent results have shown that it remains an important driver of the automaker's performance. However, as a result of the significantly poorer performance of this market, it has unsurprisingly managed to improve the balance between European and non-European markets, with this now standing at 54.4% of sales taking in place in Europe this month against 63.6% a year ago. However, this has not only come via the contraction of this market, with sales in these external markets having been seen to increase by 15.3% y/y in February. This growth is likely to continue this year, as local production in India picks up and the company seeks to further develop its sales in Russia and Brazil with investments in local manufacturing. However, while sales continue to improve in China, it remains reliant on imports. This is not stopping it from developing its brand image in the region, with the latest model set for launch being the Talisman to be shown off at next month's Beijing Motor Show (see China: 22 March 2012: Beijing Motor Show 2012: Renault to Unveil Talisman Flagship for Chinese Market). This work now could stand it in good stead for when it begins producing models locally with Dongfeng, planned for 2015. Although Europe is likely to be difficult over the course of this year, Renault will be hoping that new launches will provide some uplift at a later date. As well as the electric vehicles (EVs) that it has been launching, of most interest to many will be the next generation Clio which will be introduced in the second half of the year, although it is yet to be seen how much of an impact this will really have in 2012. Other new models include the new Dacia Lodgy, which precedes the next generation of the Logan and other variants. Despite this, IHS Automotive anticipates that Renault Group sales will be poorer than a year ago, with difficulties not only being seen in Europe, but also coming from South America and South Korea. As a result we forecast that its sales will fall by 8.4% y/y to 2.39 million units.