What Challenges Does New Renault CEO Provost Face?

PARIS () - New Renault CEO Francois Provost is set to assume leadership of the French car company during a period when signs of strain have emerged from its previous successes, as the firm lowered its annual profit projection this month amid decreased sales figures.

Here are several obstacles that lie ahead for Provost as he assumes his role on Thursday.

TOUGHER COMPETITION

Although Renault has generally avoided U.S. tariffs since it doesn't operate in the American market, it has faced indirect consequences due to heightened business competition. This comes as European rivals, seeking fresh markets beyond the U.S., intensify their attempts to expand into the French company's local area.

The firm noted no increase in sales volume during the second quarter and cautioned about poor sales outcomes in June.

It is also encountering increased rivalry from Chinese companies, particularly in the areas of electric vehicles and hybrid models.

Barclays analysts suggest that Renault might have experienced a decline in pricing growth during the first half of this year. The firm is set to release its complete financial results for the period on Thursday.

RELATIONSHIP WITH EUROPE AND VEHICLES

Due to slow growth in Europe, where Renault sells over 70% of its vehicles, the company must grow within developing markets. It has already announced intentions to allocate 3 billion euros ($3.4 billion) to introduce eight new models under the Renault label for non-European regions by 2027.

It will also focus on building less cyclically driven businesses outside of automobiles, including electric vehicle charging and financial services, as part of a midterm plan that former CEO Luca de Meo intended to announce later this year.

TOO SMALL, LESS INDEPENDENT

Being aware that its compact scale limits its ability to finance the advancement of electric and self-driving cars, Renault has established various collaborations, such as with China’s Geely in South Korea and across engine technologies globally, as well as with the Volvo Group for electric delivery trucks.

Nevertheless, this approach has caused worries within labor groups that the firm might forfeit its internal expertise and autonomy. Renault, which holds the 15th position in global sales volume, often faces speculation about forming an alliance with a bigger competitor like Stellantis.

Collaborations with Geely have raised concerns among some regarding possible influence from China, although Renault's primary owner, the French government, states that these partnerships do not affect the company's capacity for independence.

A RAPID RATE OF MISSIONS

Under de Meo, Renault initiated one of the most significant product overhauls in its history, introducing a new line-up featuring ten debuts and two model updates throughout the previous year.

They are preparing for seven additional launches and two updates in 2025, such as the Renault 4 and the Dacia Bigster, along with eight more in 2026, as per informed sources.

Crucial for expanding market presence, new product introductions also demand substantial spending on advertising and precise manufacturing adjustments to ensure vehicles meet deadlines and maintain proper standards.

VAN WOES

A key player in Europe's lucrative commercial vehicle sector, Renault experienced a 29% drop in van sales during the first half because of economic slowdowns and changes to its model lineup and products.

RETURNING TO INVESTMENT-QUALITY STATUS

A key focus for Renault is restoring its credit rating to an investment-grade level in order to draw in fresh investors, while simultaneously increasing its market value, which stands at just 10 billion euros compared to Stellantis' 23 billion euros.

Renault has a credit rating of Ba1 from Moody's and BB+ from S&P Global, which is just one level beneath investment-grade status.

NISSAN

After beginning to realign its collaboration with Nissan at the start of 2023, Renault has carried out three stock sell-offs, lowering its ownership in the Japanese company to 35.7% (17.05% owned outright and 18.66% through a trust).

It must identify the appropriate moment to increase sales, which has become harder due to Nissan's financial and operational issues.

It will also be involved in Nissan's restructuring, especially if the Japanese firm chooses to enter into a strategic alliance with another automaker. Renault had previously objected to proposals for a collaboration with Honda, as they felt the financial conditions were insufficiently favorable.

($1 = 0.8721 euros)

(By Gilles Guillaume; Edited by Dominique Patton and Emelia Sithole-Matarise)