Renault: implementing cost-saving measures

Renault: implementing cost-saving measures

Renault Group has announced its H1 2025 preliminary financial figures, revealing a set of measures aimed at addressing the current market challenges. The company reported a group revenue of €27.6 billion, a 2.5% increase from the previous period. However, the operating margin stood at 6.0% of group revenue, and free cash flow was €47 million, significantly impacted by a negative change in working capital requirement of around -€900 million [1].

The financial performance was affected by a lower-than-expected performance in June, with volumes slightly lower than anticipated, an underperformance of the light commercial vehicle (LCV) business in a sharply declining European market, and billing timing differences impacting receivables [1]. Additionally, the higher level of inventories at the end of June compared to March 2025, totaling 530,000 vehicles, further strained the company's cash flow [1].

In response to these challenges, Renault Group has revised its FY 2025 financial guidance. The company now aims for an operating margin of around 6.5%, down from the previously announced 7% or higher, and a free cash flow between €1.0 and €1.5 billion, compared to the previously targeted €2 billion or more [1]. These adjustments reflect the company's commitment to cost reduction and value creation over volume.

Duncan Minto, Renault's interim CEO and CFO, has been appointed to lead the company through this transitional period. He will work alongside Jean-Dominique Senard, who will hold the position of chairman. Minto's appointment follows the sudden resignation of former CEO Luca de Meo, who joined luxury group Kering [2].

Renault's revised financial targets and leadership changes underscore the company's strategic pivot to navigate industry headwinds. The automotive sector is undergoing a seismic shift towards electrification, with the EU's Fit for 55 regulations mandating a 55% emissions cut by 2030. Renault's strategy, which includes 10 EV launches by 2025 and a €14 billion EV investment plan, positions it to capitalize on this trend [3].

The company's cost-saving plan focuses on SG&A cost reduction, manufacturing, and R&D savings. Renault aims to achieve a 5% operating margin by 2025 through these measures, targeting a 3 billion euro fixed cost reduction by 2025. The company's flexible production model allows it to switch seamlessly between combustion, hybrid, and EV platforms, enhancing its competitive position [3].

Investors should closely monitor Renault's progress in implementing these cost-saving measures and the company's ability to achieve its revised financial targets. The interim leadership's success in balancing short-term pain with long-term strategic bets will determine Renault's future in the automotive revolution.

References:
[1] https://media.renaultgroup.com/h1-2025-financial-figures-and-fy-2025-financial-guidance/?lang=eng
[2] https://www.theglobeandmail.com/business/article-renault-duncan-minto-interim-ceo-2025-forecast/
[3] https://www.ainvest.com/news/renault-s-crossroads-can-interim-leadership-navigate-revised-financials-in-a-shifting-auto-landscape-25071010404c05660e956713/