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Carmakers Stellantis and Renault both warned of the need for cost cuts despite rising profits, as the industry heads into a “turbulent year” of economic and political uncertainty, and lower margins from pivoting to electric vehicles.
Shares in both groups rose on Thursday morning after Renault raised its dividend and Stellantis announced a €3bn share buyback. But both carmakers warned they needed to cut electric vehicle costs in the current financial year as they increase sales.
“Cost reduction remains our obsession,” said Renault’s chief executive Luca de Meo on Thursday, adding that the carmaker was aiming to reduce EV costs by 40 per cent, with plans to cut costs from petrol or hybrid models by 30 per cent by 2027.
Stellantis’s finance chief Natalie Knight said profits from electric models remained “lower than on [internal combustion engine] vehicles”, which “does have an effect on margins”. She added that the carmaker, which owns Jeep, Ram and Peugeot and is planning to launch eight electric models in the US this year, needed to cut costs.
She said a number of economic and political uncertainties meant the group was facing a “turbulent year”, despite the fact that falling interest rates and raw material costs are likely to help profits.
“The big challenges are a lot of macroeconomic developments, political developments, that keep things uncertain,” said Knight. “Most of those things are . . . outside of our control.”
Weaker Stellantis sales in North America as well as the impact of last autumn’s strikes saw margins across the whole company fall last year, dropping from 13.4 per cent to 12.8 per cent.
However net profit rose 11 per cent, to €18.6bn, on revenues that were 6 per cent higher at €189.5bn. The company also launched a €3bn share buyback on Thursday, sending shares to a record high in morning trading.
Renault shares rose by more than 6 per cent after it reported record operating margins of 7.9 per cent in 2023, and said it would boost its dividend to €1.85 per share, up from €0.25 the previous year.
However the company, which released earnings late on Wednesday, forecast lower margins of about 7.5 per cent in 2024. It said last year’s margins would have been lower, at 6.9 per cent, had it not been for some accounting effects from its combustion engines division, which will be phased out. The figure compared with a margin of 5.5 per cent in 2022.
Net income came in below analysts’ expectations at €2.2bn, but compared with a loss the previous year after the carmaker was hit with writedowns on its Russia exit.
Renault’s chief financial officer Thierry Piéton said 2024 would be a “breakthrough year” for the company’s electric car push even after it recently called off a stock market listing for its EV division Ampere.
“We mustn’t fall into a complete depression on electric cars,” Piéton said on Wednesday evening. “There’ll certainly be some changes in the rhythm of adoption. But the train has left the station.”
