Renault’s Decision to Abandon Ampere’s IPO: Renault’s recent decision to withdraw its initial public offering (IPO) plans for Ampere, its electric vehicle and software subsidiary, has resonated positively with investors. The move was prompted by concerns over the potential complexity of Renault’s holding company structure and a challenging outlook for the electric vehicle (EV) market.
Initial Concerns and Market Valuations: When Renault initially unveiled its plan for an IPO in Ampere, there were concerns among potential investors about the risk of leaving Renault with a convoluted holding structure. Market valuations, initially estimated between €8 billion and €10 billion, were deemed overly ambitious. Analyst valuations suggested a more conservative range of €4 billion to €7 billion, highlighting the disparity.
EV Market Challenges and Global Trends: The EV market, once vibrant, has faced challenges as unsold vehicles accumulate on dealer forecourts. Strong sales targets are proving difficult to achieve, with falling prices and shrinking profit margins. Notably, Chinese companies like BYD and SAIC are gearing up for a competitive assault on the European market, boasting cost advantages of at least 30% over European counterparts.
Renault’s Response to EV Market Conditions: Berenberg Bank acknowledged Renault’s decision in light of the short-term downturn in EV prospects. However, the move was seen as negative for Renault’s investor perception. The challenging EV market, characterized by high competition in price and products, fading demand momentum, and uncertainties surrounding subsidies, contributed to investor skepticism about pure-play EV companies.
Analyst Perspectives and Renault’s Future Outlook: Analysts, including those from Berenberg Bank and Bernstein Research, provided insights into Renault’s outlook. Despite the negative sentiment around the Ampere IPO, Renault still holds ambitious targets, including six vehicle launches, free cash flow breakeven in 2025, and 10% margins by 2031. The decision to abandon Ampere’s IPO was considered a removal of a negative factor, allowing for a closer examination of Renault’s 2024 outlook.
Positive Market Response and Strategic Focus: Jefferies regarded the Ampere cancellation as a logical decision, removing complexity and enhancing shareholder positivity. The ring-fencing of EV operations to reduce costs remained intact, supported by adequate funding. With current pure EV valuations making an IPO unattractive, the market saw potential upside for Renault shares amid the prevailing negative sentiment.
Renault’s Ongoing Initiatives and Future Plans: Renault, with France holding a 15% stake, continues to impress investors with profitability restoration efforts, alliance reforms with Nissan, and adjustments following the exit of its Russian subsidiary. Plans for an “affordable” sub-$22,000 electric car, the Legend (formerly Twingo), align with the goal of increasing annual sales to €10 billion by 2025 and exceeding €25 billion by 2031.
EV Sales Outlook in Europe: Despite current challenges, EV sales in Europe are anticipated to accelerate, with expectations of reaching around 9 million units annually by 2030, up from the current level of approximately 2 million. Renault remains committed to Ampere’s goals, aiming to break even in the second half of 2025 and achieve sales of 1 million vehicles by 2031.