After very successful stints at Fiat, Audi and Cupra, Luca De Meo is at the helm of the Renault Group since 2020. He mastered the Renaulution come back plan skilfully and turned the French manufacturer into a healthy company. Going into 2025 the challenges are high but so are his expectations.
Question: Retro design is an idea that causes shivers to 90% of the designers I met in my career but then the market impact of vehicles such as the Fiat 500 or the R5 proves the customer is conquered by it. It even seems Citroen is doing some sketches around the 2 cv… will the R17 reincarnation come to life?
Luca De Meo: This is an ongoing debate. I am linked to leveraging the heritage of brands and reinterpret the roots in a modern way. But we also have to take into consideration that parallelly I have led vehicle launches that are totally modern looking cars with totally different overall approaches. I have the Fiat 500 in my past, yes, but look at the new Scenic (kept the name and nothing else), look at the Rafale but also the Cupra cars… If there is something money cannot buy is heritage and car brands should build on that. If you are Cartier or Hermes and you want to nurture your timeless assets because it allows you to connect to your audience in a unique way that no other brand can. So that´s what I tried to push for: connect Renault to the customer´s positive memories but innovate in terms of software and hardware. With the R5 I wanted to anchor the brand to positive memories from our audience and that helps to leverage the brand value but then we push the envelope dramatically with other products that are innovative altogether. People go to the opera and listen to musical works that are 200 years old and they love it… on the other hand, if you ask our head of design for Renault, Gilles Vidal, if it is easier to sketch the reinterpretation of the R5 or R4 or a new generation B-segment car he will tell you that the former is much more difficult and sensitive because you can easily mess it up…
Question: And the R17…?
Luca De Meo: That segment is very limited, and I have to manage our resources cautiously. I prefer to put the money on the R5 Turbo which is something that is creative and will be coming in a not-so-distant future. Stimulating creativity is good but it´s difficult to turn such a project like the R17 into a profitable one considering the size of that market segment.
Question: On the 20th of February you will present the 2024 financial results for Renault group. The outlook by half-time was promising (8,1% profit margin – intended 7,5 – and 1.3-billion-euro free cash flow – intended 2.5). Obviously, you will not disclose the results now, but will you surprise the world?
Luca De Meo: We are now in the “quiet period” and we cannot make comments on what the results will be. We can only say that the numbers you mentioned are the ones we are aiming for. The numbers are being put together.
Question: Looking at your 2024 sales, more than 2/3 of the 2.26 million registered pc were from the Renault brand. Is this dominance something you would like to mitigate in the future as Dacia keeps growing and Alpine enters a new era?
Luca De Meo: There is no guidance on the mix between the brands in our total volume. I let the brand CEOs to exploit the potential of each brand to its full extent with the overall customer satisfaction and profit as the main focus and not volume. So far it has worked: Renault has never been so successful and profitable in the 125 years of its history. And you can see that in the case of Dacia, for instance, as I gave them the green light to enter the C-segment with the Bigster. Dacia does not need to stay outside Renault´s brand core segments because they are so clearly set apart that the danger to cannibalize themselves simply does not exist. Unlike what happens in other rival groups, even if it is fair to say this is easier to do with three than with 12 brands, of course. We positioned the Sandero as nº1 in Europe and the Clio number 2, and they are same size vehicles. And we can see something similar with the Duster and Captur, Austral and Bigster, etc.
Question: Much of the powertrain sales mix depends on legislation, incentives, etc, but a good deal has to do with the strategic product decisions you take the year or several years before. Are you on track to achieve the 20-22% EV sales share at the end of 2025?
Luca De Meo: When I came to Renault, I instantly confirmed we had the e-propulsion competence with a valid and competitive EV platform (from Nissan) for the Megane and Scenic and that some people inside the company were fighting for almost a decade to develop hybrid technology for our model range. My decision was to pursue those two vectors, and I decided to build our line-up around those two technologies expanding all the way down to B-segment EV and even A-segment, when the new electric Twingo is launched next year. And these two platforms will underpin our cars covering 80% of the European car market. Would you believe just a 3 or 4 years ago if I told you Renault would be number 2 in Europe in terms of sales of hybrid cars, with a 16% share, just below Toyota who have done it for more than two decades. So, with this strategy, with our EV cars and hybrids and considering we sell a high mix of small to medium cars, I believe that we will be in a position to comply with the tougher emission regulations and to get to that EV share of 22%.
Question: The alternative would be to pay billions in fines for the excessive CO2 emissions.
Luca De Meo: We have not bought emission credits from Tesla nor BYD, but unlike Ford, Stellantis, Mercedes, etc… they all had to do it… Or pay multimillionaire fines which is something that I think does not make any sense. We are not guilty of any wrongdoing, we in this industry invest 250 billion euro in R&D to push technology – more than any other industry – and we are the only ones paying? Why? There will be more than one hundred new EV until the end of this decade, we are doing the job… except that there is no demand…
Question: Renault might comply to the regulations, but the European automotive industry is in serious trouble as it will be necessary to slow down ice cars production to get to the necessary EV share…
Luca De Meo: If the European car industry cuts the production of the so-called “big offenders” of the emission limits, we are talking about 2,8 million cars that have to be eliminated from the production plans each year. This would or will impact the European production footprint with obvious side effects in terms of employment, etc.
Question: Expected to come in 2030, are the cobalt free batteries with a silicon anode (to get the energy density of NMC at the cost of LFP) the decisive factor to the much-needed EV cost reduction? And then followed shortly after by solid state batteries (SSB)?
Luca De Meo: Cobalt today is relatively cheap, so it is less an economical issue than the intention to avoid being caught in the middle of certain supply chains we don´t control, as some 80% of the global production comes from the same place (note: Congo). Right now, we are working to increase the energy density of NMC chemistry but also exploiting the potential of LFP (it is less sensitive in terms of raw materials and cheaper) which could also get more energy dense with some manganese added to it. Regarding SSB, I believe it will become real way beyond 2030, even of some brands will come up with some halo cars with full SSB before that, in very limited volumes and at premium market segments. But massive adoption will happen later.
Question: The airbus business you advocated for the electromobility era stalled after the cooperation with Volkswagen failed. Why did it fail?
Luca De Meo: You have to ask Volkswagen. We could make out cost effective B-segment electric platform from the R5 available and I thought it could be a way to bring back small cars sales volume increase in Europe. Compact cars are disappearing in Europe because in the last two decades regulations pushed the weight and the technology standards have increased dramatically and so did prices which the customer is not interested in buying and the brand is not interested to produce because they can´t get any profit. That´s why there are no replacements for cars such as the VW Polo or the Fiesta and others, there are just a few A-segment options… so people buy Dacia or used cars. Our platform which I make available to other brands provides a technical base that could be used to launch B and A segment cars at prices people can buy and with a profit since the shared cost would make it possible. They can come and take the platform or just produce in our factories, but the opportunity is there that would benefit everyone. Europe needs to be less fragmented and cooperate more like the American and the Chinese do.
Question: Can you give a concrete example on how new regulations increase the price of a car?
Luca De Meo: From today until 2030 there will be eight to ten new regulations becoming effective in Europe every year and applied to every new car being produced. If all of them are really enforced, this will increase cost of the car by 40%, in general, all segments comprised. And if you add 400 euro of cost (and much more than that in the price the customer pays) to every B-segment car that is dramatic, much more than on a BMW 7 Series, of course. Geo-strategically this is very complicated: countries like Portugal, Spain, Italy or France are markets dominated by compact cars. Then the manufacturing ecosystems are emptied, then the GDP are affected, then the unemployment rates increase…
Question: Mitsubishi has recently launched more Renault-based cars, there is a plan to build EV cars for Nissan in the near future, on the other hand Honda seems to have a preference to join forces with Nissan freed from foreign capital… what do you make of the whole Nissan-Honda merge discussion?
Luca De Meo: This is a very sensitive issue. But we don’t have to mix the capitalistic matters with the operational projects, and we will continue with the projects that we already signed (the Nissan compact EV, the Mitsubishi cars, etc). We don´t know what will happen but we are open to provide our technology if it is requested. There might be an impact in our strategy, but this is something we will find out in due time. We had already announced our intention to reduce our share in Nissan and we did from 43 to 35% and we will do it gradually, keeping our cross-share participation of 15% of shares on either side. Which naturally can be discussed… but the bottom line is that, like in a divorce between two people, if we leave the house, we want to get back whatever resources we invested for the project.
Question: Quoting Luca de Meo: “by 2028, with the new c segment EV platform Renault will catch-up the best Chinese players in terms of product and cost”. End of October 2024. Did you mean that applied to what the Chinese will presumably be doing by 2028 or to what they were doing in October 2024 when you said it?
Luca De Meo: Chinese are very creative and very fast but still we have enough elements to anticipate what could be their next product generation by 2028. And that was what I was referring to: we took the challenge to be on par (in terms of product performance and cost) with the best Chinese competitors regarding the cars that they will develop and manufacture in Europe. If we talk about the Chinese industrial environment, it is simply not possible. Even in something simple as the cost of energy which in Europe we cannot match. That´s why we created Ampere, our EV company which is working hard to achieve an average 40% cost reduction for the next generation of electric cars to be launched in the near future (actually we reached that goal in the Twingo vs the R5).
Question: Although brands like Mercedes-Benz, Audi or BMW always affirmed they would like to have an even sales volume in the world´s most important regions, they never complained about the volumes and profits they achieved in China. Is it a relief for Renault not to have a strong presence in the Chinese market, looking at it from where we stand today?
Luca De Meo: Two or three years ago we were told considered “just” a Southern European and Latin American car manufacturer, we had lost the Russian market… so everybody was looking at us as a clear underdog. Now the scenery has changed, and we are seen as considered protected from USA tariffs, Chinese market meltdown…you never know how things change. For me, the most important thing is that we are doing the best financial performance in the 125 years of our history and with the focus in defending the shareholders’ interests, securing jobs and coming up with attractive and competitive vehicles for our customers. Being number 1 or better than the others is not something we worry about.
Question: Before leaving ACEA´s presidency last year, you defended a 2-year delay or at least some flexibility from the EU regarding the 93,6 g/km CO2 standard in place this year. What is the situation today?
Luca De Meo: We had a meeting with President Van der Leyen in the beginning of February and even if I am not the industry spokesperson anymore, and after the feedback we gave I believe we will have some sort of reaction sometime during March. Things such as the lack of incentives, energy prices, charging infrastructure, fiscal policies, etc… they all need to be tackled urgently so flexibility from the legislators is necessary. We have done our homework… if the market demands twice as many R5 in some months, we can produce them. But that´s not the case. So, we need to work together and not impose fines for OEM that are doing their job. And there is no going back, there is no point in considering going back to diesel engines or other dated technologies, because if we would refuse the future, we would find the Chinese doing spaceships while we produce pick-up trucks. Does that mean 100% EV by 2035 in Europe? Probably not. We need to set tangible targets on the necessary path to decarbonization but not just having the regulators define fines for the “guilty”. It would absorb 15-billion-euro capital that could otherwise be injected in plants, technology, jobs, etc. Our industry is worth 10% of Europe´s GDP and 30% of the region´s R&D budget. It´s huge.
Question: Considering that one of the main purposes of being involved in F1 (and in motorsport activities in general) is to promote the competent engineering assets in the brand/company (the other being the tech osmosis between motorsport and series production cars), how damaging to Alpine is the end of the F1 participation with own made engines as you will outsource them instead?
Luca De Meo: The current regulation of F1 is very penalizing for the teams that build their own engines and chassis. If I simplify it, there is a budget cap of 150 million euro for chassis development and then there are no strings attached for the engine development, which increases cost on another 250 million euro. The FIA rewarding scheme is only given to the chassis results so when McLaren or Aston Martin win, they get the financial compensation in full (aside from the income that comes from sponsoring) although they use Mercedes-Benz engines. At Renault, we have to pay an additional 250 million for the engines. I run a listed company, and I have been doing that for a decade, I have to take rational decisions every day. The media reacted negatively to the decision of using Mercedes-Benz engines, but the business case would not work otherwise: the annual cost will be 20 million euro for the engines which compares to 250 million… so if that was your money, what would you do? I am a strong believer in the value of brands, and it was not an easy decision to take, but it was a vital one. And when Alpine scores regular podium finishes and wins all the negative noise will wash away.
