Renault Global Sales Fall 3.1% Y/Y in 2009; French President to Speak with CEO on Reported Clio Move

The Renault Group has announced that despite a small increase in its global market share during 2009, its overall sales fell by 3.1% year-on-year (y/y). The French automaker revealed that sales had declined from 2.382 million units to 2.309 units, but due to an expected decline in light vehicle sales globally of 4.7% y/y, it had seen market share increase by 0.1 percentage points to 3.7%. By category, global passenger car sales had increased by 0.7% y/y to 2.032 million units, but light commercial vehicle sales had fallen by 24.1% y/y to 276,549 units. Renault also revealed that sales at its Romanian-based Dacia brand and South Korea's Samsung had kept it from seeing even greater sales declines during the year. As global sales of the Renault brand fell by 7.8% y/y to 1.861 million units, sales of Dacia light vehicles increased by 20.5% y/y to 311,282 units, while those of Renault Samsung jumped by 30.6% y/y.

On a regional basis, the Renault Group's sales in Europe actually increased by 1.5% y/y as a result of the advantage gained from the scrapping incentives and other market support in the region. Sales increased to 1.529 million units during the year, with almost half of these stemming from the French market, where sales increased by 7.3% y/y to 702,083 units. However, gains were also reported in Germany (+45.1%) and Italy (+5.3%), with a great deal of support having come from the Dacia brand. However, the situation elsewhere was less than positive, with rest-of-the-world sales having fallen by 10.9% y/y to 779,096 units. The only gains that were seen here stemmed from the Africa-Asia region, where sales increased by 3.4% y/y to 222,414 units, largely as a result of the gains made by Renault-Samsung in South Korea, where it now has now lifted its market share to 9.3%.

President Sarkozy to Meet Renault CEO on Clio Production Rumours

French President Nicholas Sarkozy is set to meet with Renault's chief executive officer (CEO) Carlos Ghosn, following reports that the automaker could shift production of its B-segment Clio from Flins (France) to its plant in Bursa (Turkey). The pair will meet on Saturday (16 January). Government spokesperson Luc Chatel told Reuters following a cabinet meeting that it was "completely normal" for the government, which holds a 15% stake in the business, to make its views clear, adding that "The government would have no understanding for a measure that consisted of moving abroad production of such a symbolic vehicle for French people as the Clio."

Yesterday, Industry Minister Christian Estrosi met with Renault's chief operating officer (COO) Patrick Pélata to discuss the matter. Following the meeting Estrosi told reporters "I want to say very clearly... that we would not be well disposed towards a decision to have the Clio 4 mainly produced in Turkey. Decisions will come from the meeting that meet the choices that the president of the republic, as a shareholder of the Renault group, will impose upon them." Estrosi added that Pélata had pledged not to cut jobs at Flins.

Following the meeting, Pélata also told journalists that Renault was planning to halt production of the Clio in Spain and Slovenia, but no decision had yet been taken on expanding the Turkish facility.

Outlook and Implications

While the year has seen negative growth for the Renault Group, it appears to have done better than the market average, and held its own in the global standings. As mentioned, much of this relative success has been spurred by incentives and support being offered by the governments of some of its largest markets. France's scheme has pushed the overall passenger car market up to an almost record number of sales (see Europe: 5 January 2010: France, Italy and Spain All Benefit from Government-Backed Scrappage Schemes in 2009), while in Germany, the regions most successful measures saw the market rise by 23.2% y/y (see Germany: 7 January 2010: Record 23.2% Y/Y Rise in Sales Seen in Germany for 2009 as December Gives a Taste of Things to Come). Elsewhere, Italy, Spain and the United Kingdom also saw their own schemes ease the declines, with some benefit also coming from the low base comparison which gave the further appearance of a lift in the latter stages of the year. However, whether this will transfer greatly to the automaker's financial bottom line remains to be seen, particularly as demand has tended to focus on lower-cost models such as the Renault Twingo and Clio and Dacia Sandero, which offer lower profit margins. It is only likely to be the latest generation of the Mégane, launched at the onset of the crisis, and its Samsung offerings in South Korea where greater financial rewards are likely to be found. It also remains to be seen how Renault will be affected when market incentives are reduced or withdrawn altogether in 2010, and whether this will lead to further sales declines in markets where it is most active.

This current situation also highlights Renault's lack of exposure to the BRIC countries—Brazil, Russia, India and China—than some of its rivals. Although it has seen some benefit in Brazil, its rate of growth there of 2.1% y/y was behind the market as a whole for the year of 12.6% (see Brazil: 11 January 2010: Brazilian Light-Vehicle Sales Finish 2009 with 51.1% Y/Y Jump in December; Production Skyrockets 164%), while in Russia, sales have tumbled at below the market rate, but are still down compared to 2008. While it is still keen to set up more significant operations in India, these plans have been delayed by the financial crunch being faced by the rest of the business. For now it will need to rely on the Logan, which continues to see large declines in an expanding market. However, it is China where it seems to have missed out the most. Sales of passenger cars in the country have been lifted by almost 52.9% y/y in the YTD and now stand at 10.33 million units (see China: 10 December 2009: Chinese Vehicle Sales Surge 96.4% Y/Y in November; Government Extends Incentive Measures Into 2010), as the French automaker has yet to make a mark as it continues to rely on imports. While it could be said that Renault will see benefits from China through its stake in Nissan, there is nothing like direct exposure, and it seems all too aware of its neglect of the market with plans set to include production here. However, it will need to move fast—competition is stiffening as both its global automakers establish a greater presence in the region, and local automakers become increasingly established.

However, more immediate pressure seems to be coming from the French government following French media reports last week regarding the possibility of the Clio's shift to Bursa (see France - Turkey: 11 January 2010: Renault Considering Turkey as Next Generation Clio Base; French Minister to Meet Management). While from a business perspective this may well seem to be a good idea, using the lower labour costs available to it in Turkey, there are a multitude of other factors to take in to account. The shareholding that the French government has in the business is an important point, but also the matter of the soft loans that were offered to French automakers with the onset of the downturn (see France: 21 January 2009: French Car Industry to Receive 6 bil. Euro of State Aid). According to a Reuters report, Sarkozy told fellow parliamentarians "We are not putting a lot of money on the table to help our carmakers in order to see all factories go abroad," but added that "It is a matter of balance. It would be absurd to prevent a global company from creating factories elsewhere; that goes without saying." However, while Flins has already secured the Zoe electric vehicle (EV) and is also expected to see production of batteries, initially slow demand for this new technology could see a dramatic downturn in production if the shift took place, and a threat to jobs. The government will also want to look to secure the model at the plant for this reason, not helped by the upcoming local elections where it could well become a factor. However, this will need to be balanced with difficult relations with the Turkish government over its resistance to letting the country join the European Union (EU). Another factor is that the Turkish facility is already flat out manufacturing its share of the current Clio and has just started production of the Fluence there, and would require further investment to achieve the plan which would take it to a size equivalent to Volkswagen's (VW's) Wolfsburg (Germany) facility if all Clio production was shifted there.