Renault's Crossroads: Can Interim Leadership Navigate Margin Cuts and Chinese Competition?

Renault finds itself at a pivotal juncture. On July 15, 2025, Duncan Minto, the company's CFO since 1997, became interim CEO amid a leadership vacuum following the abrupt departure of his predecessor. This transition coincides with revised financial targets, escalating competition from Chinese automakers, and questions about the strategic viability of its electric vehicle (EV) division, Ampere. As Renault's stock trades near a 52-week low and its valuation discounts peers, investors must weigh near-term risks against long-term opportunities. Here's what the data reveals.

Leadership Transition: A Financial Firefighting Role

Minto's interim tenure is framed by urgency. Renault slashed its 2025 operating margin guidance to 6.5% (from ≥7%) and trimmed free cash flow projections to €1.0–1.5 billion (down from ≥€2 billion). These cuts stem from inventory overhang (530,000 vehicles as of June 2025), weaker LCV sales, and a 1% drag from stricter CAFE regulations.

The stock has underperformed peers, reflecting investor skepticism about Minto's ability to stabilize margins and execute Renault's Renaulution transformation plan. While his financial acumen is a strength, the lack of a permanent CEO—a role speculated to be filled by Denis Le Vot or Maxime Picat—adds uncertainty. A prolonged leadership void could deter capital allocation decisions, such as finalizing partnerships or accelerating EV launches.

Margin Pressures: Structural or Temporary?

Renault's Q1 2025 results highlight a mixed picture. Automotive revenue fell 3.0% YoY, driven by:
- Geographic mix shifts: Higher sales in lower-margin regions like Latin America and South Africa.
- LCV underperformance: A 21% sales decline for Renault's commercial vehicles, reflecting outdated models like the Master and the discontinuation of the Express.

However, electrification gains provided resilience. EV sales surged 87.9%, with the Renault 5 E-Tech and Scenic E-Tech driving a 44.2% electrified sales mix in Europe.

The key question: Can cost-cutting and inventory reductions stabilize margins? Minto has already slashed €2 billion in costs since 2023 and aims to reduce inventories to 560,000 by mid-2025. While these steps address liquidity, sustained margin recovery hinges on:
1. LCV turnaround: The new Master and potential alliances with Daimler's Mercedes-Benz Commercial Vehicles.
2. Electrified sales growth: Meeting its target of 50% EV penetration in Europe by 2025.

Ampere Division: Stagnation or Strategic Shift?

Ampere, Renault's EV-focused arm, canceled its IPO in January 2024 but continues its product offensive. Its 2025 goals include 300,000 EV sales and collaborations like the Nissan Micra (to be produced at Ampere's French plant). While sales growth is strong (EVs up 87.9% YoY), Ampere's progress is tempered by:
- Market share competition: Tesla's dominance in premium EVs and Chinese brands like BYD's aggressive pricing.
- Alliance restructuring: The Renault-Nissan-Mitsubishi Framework Agreement reduced cross-shareholdings, potentially limiting synergies.

Despite challenges, Ampere's self-funded model (relying on Renault's cash flow) avoids dilution risks. However, its ability to scale profitably without external capital remains unproven.

Chinese Competition: A Threat or Catalyst?

Chinese automakers' market share in Europe doubled to 5.9% in May 2025 (from 2.9% in 2024), with BYD and MG targeting fleet and leasing markets with cost-effective hybrids. In Norway—a tariff-free EV hub—BYD and XPeng now rank among the top 20 sellers.

For Renault, this poses two risks:
1. Pricing pressure: Chinese brands undercut premiums on hybrids, squeezing margins.
2. Brand perception: European buyers may view Chinese EVs as technologically superior, eroding Renault's premium positioning.

However, Renault's Dacia brand (e.g., Sandero) retains affordability and market share in budget segments, while the Renault Clio's strong sales (up 11.6% in May) show resilience in mainstream markets.

Valuation: Are Risks Already Priced In?

Renault's current valuation reflects pessimism:
- P/E ratio: 8.5x vs. 12x for Nissan and 14x for Stellantis.
- Dividend yield: 4.9%, attractive for income investors.
- Debt: Low at €1.8 billion, giving flexibility for strategic moves.

The stock's discount suggests investors are pricing in margin risks and leadership uncertainty. However, catalysts ahead of Q2 results (July 31) include:
- Progress on inventory reductions and LCV sales.
- Ampere's execution on its 2025 sales targets.
- Signs of stabilization in European market demand.

Investment Thesis: A Buy-the-Dip Opportunity?

Risks:
- Further margin compression if LCV sales or CAFE costs worsen.
- Leadership uncertainty delaying strategic decisions.
- Chinese competitors capturing premium segments.

Opportunities:
- A permanent CEO with EV expertise could reinvigorate Ampere's growth.
- Renault's self-funded model avoids IPO dilution while capitalizing on its French manufacturing base.
- Undervalued stock creates a margin of safety for long-term investors.

Conclusion: Renault's valuation appears to discount near-term risks. Investors with a 3–5-year horizon may consider a gradual build into the stock ahead of Q2 results, particularly if inventory and LCV metrics improve. However, caution is warranted until a permanent CEO is appointed and Ampere's profitability materializes. For now, the balance tilts toward a hold, with a buy rating possible post-Q2 if the company meets its revised targets.

Data as of July 14, 2025. Past performance is not indicative of future results. Consult a financial advisor before making investment decisions.