Renault CEO Luca de Meo’s strategic investment in low-cost gearbox technology is proving to be a game-changer for the French automaker, enabling it to make significant strides in Europe’s rapidly expanding hybrid car market. This move offers Renault crucial breathing room as competitors grapple with the transition to electric vehicles (EVs).
Despite a looming European Union ban on combustion engine cars set to take effect in 2035, the anticipated demand for electric vehicles has yet to materialize, putting immense pressure on the automotive industry across Europe. In contrast, Renault, which faced record losses in 2020 and operates on a smaller scale than many of its rivals, is demonstrating resilience in the hybrid vehicle segment—combining both thermal and electric engines.
According to preliminary figures from the company, Renault’s hybrid model sales, including popular models like the Clio and Captur, surged by 55% in the first eight months of the year, significantly outpacing the 21.1% increase across the entire European Union, as reported by the European Automobile Manufacturers Association (ACEA). Notably, this sales growth peaked at 60% in the first half of the year, establishing Renault as the second-largest hybrid car manufacturer in Europe, trailing only Japan’s Toyota.
Analysts at Stifel remarked on Renault’s performance following the company’s announcement on October 8 that it would maintain its business targets, making it one of the few traditional automakers not to downgrade its projections amid challenging market conditions.
With a market capitalization of €11.6 billion ($12.68 billion), Renault is valued at just a quarter of European leader Volkswagen, which allows it greater agility but also raises concerns about vulnerability amid intensifying competition from Chinese electric vehicles. The company, which is 15% owned by the French government, is also navigating a new strategic direction after largely dissolving its two-decade alliance with Nissan and Mitsubishi, and scrapping plans for an IPO of its EV division, Ampere.
Innovative Gearbox Technology
Renault’s success in the hybrid market is largely attributed to its focus on a simplified gearbox technology. Historically a pioneer in gearbox design, Renault engineers have developed a low-cost hybrid transmission system called E-Tech. This system employs a simplified ‘dog clutch’ mechanism, enabling the connection and disconnection of gears without a complex array of synchronizers.
The E-Tech system, applicable across all Renault models, reduces the number of components compared to other dual-engine systems, resulting in a lighter and more affordable product. Investor sentiment reflects this success, with Renault shares rising 6.4% this year, while the broader European auto share index has seen a 12% decline.
Philippe Houchois, an analyst at Jefferies, noted, “Renault is particularly at ease in balancing between battery electric vehicles and hybrid transmissions compared with its competitors.”
Analysts predict continued growth for Renault as it launches more affordable models. Although the hybrid Clio is priced €400 higher than the Toyota Yaris and Peugeot 208, it boasts greater power and the versatile E-Tech gearbox, which can be utilized in smaller vehicles as well as in the new 300-horsepower Rafale coupé sedan. Antoine Giraud, an analyst at S&P Global, believes that Renault will maintain this competitive edge for several years.
Hybrid Vehicles as a Strategic Advantage
The rise of hybrid vehicles, which emit fewer pollutants than traditional cars, positions Renault to comply with EU regulations aimed at limiting CO2 emissions, even as its electric vehicle sales lag behind those of competitors. Renault’s E-Tech hybrid models can emit as little as 95 grams of CO2 per kilometer, contributing to an average of 114 grams for the company in the first half of 2024—better than Ford and Volkswagen, which average 123 and 125 grams respectively.
However, Renault’s hybrid success has its limits. European regulations require manufacturers to reduce average CO2 emissions to 94 grams per kilometer starting next year. To meet this target, the company will need approximately 20% of its sales to consist of electric vehicles, a challenging feat given that EV sales currently account for about 12% of Renault’s total brand sales in Europe.
Once a frontrunner in the electric vehicle market, Renault has been overtaken by dedicated EV manufacturers like Tesla and larger competitors such as Stellantis. De Meo is set to unveil a new electric SUV, the Renault 4, at the Paris Auto Show on October 14, following the recent launch of the Renault 5, another small electric vehicle.
Giraud noted, “Increasing hybrid sales instead of traditional vehicles is a positive trend. However, the success of the upcoming R5 and R4 models will be crucial.”
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