The crunch in chip supply worsens the situation for Renault as its car production suffers more than anticipated. This obstacle has affected the automaker turnaround plans. Renault will make 500,000 fewer cars which is nearly a fifth of last year’s production. The French carmaker had predicted a shortfall of 200,000 vehicles due to a lack of components.
According to Bloomberg news, despite the disruptions in the supply chain of parts, the company has managed to stick to its profit margins target mainly due to its most profitable models. The company expects positive operational cash flow as it continues to focus on these models.
The shortage of semiconductors and other components required for making new vehicles has hurt automakers across Europe, forcing plant shutdowns and delays. Car sales in Europe are expected to fall below the 2020 levels when the pandemic shutdowns restricted deliveries.
In July, the CEO of Renault, Luca De Meo, hoped that the chip crisis would ease off in the second half of 2021. He had declared that Renault was firmly on track to make a comeback in its turnaround plan. Instead, the company lost production output of around 170,000 cars in Qtr. 3. The revenue slumped by 13% to 9 billion euros ($19.5 billion). Renault has cautioned of reduced visibility for the last quarter.
In an analyst call, Deputy CEO Clotilde Delbos said that the availability of semiconductors worsened, and the supplier’s information about its availability is unreliable.
Renault’s share prices declined by 0.8% in Paris, and the price has already dropped by 14% this year.
Renault’s factories in Palencia, SanDouville, and Batilly were closed the entire week, and the Maubeuge plant was shut down for three days.
Though the raw material cost is increasing, the company is not experiencing any shortage here. As per CEO Delbos, they are raising the vehicle price only wherever possible.
Renault’s turnaround depends on raising efficiency across its production network and refurbishing its aging models. As per Delbos, new models such as Megane will be given priority, and its launch next year will not be delayed. The company cost-cutting by 2 billion Euros is expected to be met.
The sale of its electric car Zoe slumped to around 47,000 compared to 64000+ sold during the same period in 2020 as the aging model comes under pressure from rivals’ electric cars.
