Renault to lose out on more car production due to chip shortage

Renault will lose out on far more car production this year than previously anticipated because of the worsening global chip shortage, another obstacle to the carmaker's turnaround plans.

The French manufacturer will make about 500,000 fewer vehicles – that’s equivalent to nearly a fifth of last year’s output – due to a lack of components, it said on Friday. Renault previously predicted a gap of just 200,000 cars.

Despite the disruptions, the company stuck to its full-year margin target and sees positive automotive operational free cash flow as it focuses on making its most profitable models.

The shortage of semiconductors and other components needed to make new vehicles has hurt automakers across the globe, forcing factory shutdowns and delays of new models.

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Car sales in Europe are on course to fall even below the levels in 2020, when pandemic restrictions choked deliveries.

Renault chief executive officer Luca de Meo expressed optimism in July that the chip crisis would ease in the second half. At the time, he declared that Renault is firmly on the comeback trail as it carries out its turnaround plan.

Instead, the company lost output of about 170,000 vehicles in the third quarter and revenue slumped 13 per cent to €9 billion ($10.5 billion). Renault on Friday warned of “reduced visibility” for the remainder of the year.

‘Unreliable’

The availability of semiconductors “has been worse than anticipated”, deputy chief executive Clotilde Delbos said during an analyst call. “The information we get from suppliers is, to say the least, very unreliable.”

Renault declined 0.8 per cent as of 9.12am in Paris. The shares have dropped about 14 per cent this year.

The carmaker’s Batilly, Sandouville and Palencia factories have been closed all week and Maubeuge was stopped for three days.

While the cost of raw materials is increasing, the company isn’t yet experiencing shortages of those components, Delbos said, adding that Renault is raising vehicle prices wherever possible.

Renault’s turnaround hinges on rejuvenating an aging lineup and raising efficiency across its production network.

Delbos said new models such as the Megane will be prioritised and launches planned for next year won’t be delayed. The company expects to meet its goal of cutting costs by €2 billion this year.

Sales of the electric Zoe dropped to about 47,000 during the period from more than 64,000 in 2020 as the aging model comes under pressure from rivals. – Bloomberg