Challenging Year Ahead for Renault
Renault’s €8 billion loss in 2020 was worse-than-expected as the market analysts estimated a €7.4 billion ($8.98 billion) loss for the French car business. The company said its sales were still declining in H2 2020 but at a slower pace. The car business has started hiking prices on some of its cars, it said.
The operating profit of the company rose to €866 million ($1.05 billion), or 3.5% of revenue. This business metric was in the red during the entire 2020, but it started recovering in the second half of the year.
Overall, Renault reported a revenue of €43.47 billion ($52.57 billion), representing a decline of 21.7% on a year-over-year (YOY) basis. The French company said its business margins and sales started rising back up in the second half of the year as the company initiated its remedial plan.
“After a first half impacted by the Covid-19, the Group has significantly turned around its performance in the second half. This result is the fruit of all employees’ efforts, the successful acceleration on our fixed cost cutting plan and pricing policy improvement,” Luca de Meo, the CEO of the company, said in a press release.
“The priority is profitability and cash generation, as announced during our strategic plan « Renaulution ». 2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages. We will face these challenges collectively, keeping the momentum towards recovery we’ve been successfully engaged in since last summer.”
De Meo added that challenges might continue this year as well because of a shortage in semiconductor chips which has battered the entire automotive industry. He adds that it is very difficult to say what will be the exact impact of the lack of supply. Renault’s Nissan already warned it is planning to sell fewer cars due to chip shortage.
“2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages. It’s a continuous battle until, I think, the end of the year, but we believe the supply shortage will ease in the second half, but we just have to fight,” De Meo added.
The French car business said this deficit should reach its peak in Q2 of this year, adding it could hurt its production by roughly 100,000 vehicles this year.
Renault already sustained a loss of €141 million ($171.1 million) million in 2019, only to take a much heavier blow in 2020 as production paused and dealerships closed because of the pandemic, which hurt all the carmakers around the world.
French car business Renault reported a huge €8 billion ($9.71 billion) loss for 2020 and warned of a tough year ahead due to a shortage of semiconductors.
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Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.