Renault Group CEO Luca de Meo (L) stands next to French Finance and Economy Minister Bruno Le Maire as he visits the Alpine sports cars' Renault factory in Dieppe on January 28, 2022.
(Photo : SAMEER AL-DOUMY/AFP via Getty Images)
Renault delivered some excellent news to its investors, with the French automaker reporting a bigger than expected net profit of $1.0 billion (888 million euros) in 2021, as well as an operating margin of 3.6 percent, as per Reuters. That was an impressive figure for Renault as the "Renaulution" plan had targeted an operating margin of above 3 percent in 2023.
Helping Renault reach that figure ahead of schedule is the company's decision to slash fixed costs by 2 billion euros between 2019 and 2021. With Renault's finances already improving, the French firm said that it aims to repay the 4 billion euros of state aid it received from France during the COVID-19 pandemic by the end of 2023, which is one year ahead of the 2024 deadline.
Renault is targeting an automotive operational free cash flow of at least 1 billion euros and an operating margin of more than 4 percent for this year. However, the company will have its work cut out for them from achieving that target as the ongoing semiconductor shortage continues to wreak havoc on Renault's vehicle production for the year 2022.
Production shortage hits Renault as supply chain issues linger
Renault CEO Luca de Meo announced on Friday, February 18, that the French auto giant is looking at a production shortage of around 300,000 vehicles in 2022 due to the global chip shortage. This has been a problem affecting Renault and the rest of the auto industry ever since the pandemic started in 2020.
Renault produced 500,000 fewer vehicles last year due to supply chain issues brought upon by disruptions and regulations related to the pandemic. Business analysts have predicted that the supply shortage could ultimately cost the automotive industry at least $200 billion in revenue.
De Meo spoke to CNBC about the production shortage engulfing the company, saying, "The situation right now is still pretty complicated." However, he remains hopeful that the computer chip shortage will improve in 2022 and allow the auto industry to return to a more "normal situation" over the second half of this year.
Renault to create EV spinoff?
Renault, which reported an annual profit for the first time in three years, is entertaining the idea of creating separate divisions for the combustion engine and electric vehicles. This is a concept that other automakers have resisted in the past, with companies fearful that such a move would weaken their ability to use profits from gas-powered vehicles to fund their electrification plans.
Renault presented its strategic studies to investors on Friday, saying a "pure electric entity" could be based in France with the company open to partnerships for the EV business. Renault will then maintain a separate entity for hybrid cars and combustion engine vehicles, with production focused outside of France.
Renault's main hub for hybrid powertrain production is Spain, while the French automaker sources its combustion engines from South Korea, Romania, and Turkey.
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