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Renault Jolted By Nissan Worries, Peugeot Implications

“If Peugeot-Citroen gets state guarantees, that bodes badly for Renault’s flexibility”

Just when everybody was falling in love with Renault as the only viable mass car manufacturer in Europe, along came a couple of reasons to sow some doubt.

As the likes of Fiat, Opel-Vauxhall and Peugeot-Citroen were suffering a tsunami of red ink, Renault was being kept in the black not least because of its Dacia masterstroke. Dacia not only was selling big numbers of cheap and cheerful Dusters and Sanderos with a Lodgy and a Dokker to come, but was achieving BMW-like profit margins at the same time.

Cue: much admiration from investors.

Another powerful reason to invest in Renault was its alliance with Nissan. Some investors declared that Renault was valued at zero by the stock market, with all the value coming from Nissan. But trouble is looming for Nissan in China, while investors see an unfortunate read-across for Renault from Peugeot-Citroen’s government bailout.

UBS, in a report on Renault headed “Too much Uncertainty”, said Nissan’s latest report from China were down 35 per cent after anti-Japanese riots.

“If Peugeot-Citroen gets state guarantees, that bodes badly for Renault’s flexibility,” UBS said, but it did add: “Though maybe Renault can also get guarantees and better compete against VW?”

Max Warburton says all these pluses for Renault are in fact old, and he’s getting tired of waiting for some action.

“None of the arguments put forward for Renault are really new. It’s been cheap for a decade. Dacia’s been profitable for years. They’ve owned half of Nissan since 1999. We agree the market undervalues Renault. But when and why is this going to change. One day Renault may be profitable again – or may merge with Nissan. But will we grow old and grey waiting for it to perform,” Warburton said.

Neil Winton – October 30, 2012

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