Renault’s Ampere Targets Ambitious Goals Amid Investor Skepticism
Renault, the French car manufacturer, is charting an ambitious course for its electric vehicles (EV) unit, Ampere, aiming to boost revenue to 10 billion euros ($10.8 billion) by 2025. This strategic move precedes the planned market listing of Ampere next year, an effort to reassure hesitant investors.
The company has outlined key financial objectives for Ampere, including a revenue target of 25 billion euros by 2031, achieving break-even in 2025, and attaining an operating margin of at least 10% from 2030. In addition to these targets, Renault unveiled plans for a smaller and more affordable EV model.
Despite facing challenges such as sluggish demand for EVs, market volatility, and heightened competition from Chinese manufacturers, Renault is pushing forward with its initial public offering (IPO) plans, now scheduled for next spring after a previous delay.
Complexity Surrounding IPO
The IPO has encountered complexities, with sources revealing that CEO Luca de Meo’s envisioned valuation of 8 billion to 10 billion euros might be overly optimistic. De Meo, however, emphasized that Renault has sufficient cash to fund Ampere’s growth without the IPO but views the listing as the preferred option. The funds raised from the IPO would enable Renault to expedite development and provide dividends sooner.
De Meo emphasized that the IPO would be abandoned if the valuation proved too low, stating, “We are not crazy.” Sources close to the matter suggested that Renault might reconsider the IPO if Ampere’s overall valuation falls below 7 billion euros.
While some analysts are urging alternative fundraising options, including selling a 28% stake in Nissan, valued at around 4.5 billion euros, De Meo declined to establish a specific threshold for the IPO.
Renault’s move to carve out Ampere as a separate, more modern business has garnered support, with some describing it as a leaner entity detached from Renault’s traditional operations. However, doubts persist regarding Ampere’s ability to achieve the rapid growth Renault anticipates.
UBS analysts expressed skepticism, maintaining a valuation for Ampere between 3 billion and 4 billion euros. They acknowledged the well-framed development plan but noted that the turning point in financial performance is primarily anticipated between 2025 and 2030, with limited visibility.
Counteracting Growing Competition
In a bid to counter the growing competition, Renault also announced the launch of a new EV model, Twingo Legend, priced at less than 20,000 euros. The aim is to democratize the EV market by reducing production costs, allowing for lower final prices without compromising margins. However, analysts from UBS remain cautious, emphasizing the need for tangible evidence of the success and profitability of new models priced at 20,000-25,000 euros.
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