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Renault Suffers, But Manages To Please Investors

One Thing They Won’t Like; Talk Of Initiale Paris Upscale Plan

Renault just managed to stay in the black in the first half, and remains the only European non-German mass car maker to retain some support from investors.

Renault’s automotive division reported an operating profit of €87 million in the first half, down 35 per cent from the same period of 2011, but consumed €200 million of cash.

Unlike compatriot Peugeot-Citroen, Renault has managed to widen its sales away from Europe, is making impressive returns from its Dacia downmarket subsidiary, and gets scale benefits from its alliance with Nissan of Japan.

Deutsche Bank said Renault is probably one of the best risk/reward investments in the sector.

Sascha Gommel of Commerzbank agrees.

“We believe that with Renault delivering on its targets, outlined in the ‘Drive the Change’ plan, the share (price) has substantial upside in the longer term,” Gommel said.

Philip Watkins of Citi Research is another supporter.

“We continue to see Renault as the only investable mass market European auto player given the strength of its balance sheet and its relationship with Nissan,” Watkins said.

One recent development though may spook investors.

Renault Chief Operating Officer Carlos Tavares said Renault may launch an upscale sub-brand called Initiale Paris, and a sports cars range called Alpine.

That will trigger memories of many earlier value-destroying attempts by mass car makers which tried, and failed, to mix it with the German premium brands.

Neil Winton – August 1, 2012

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