Renault sales outside Europe fail to offset declines during H1

The Renault Group's global light-vehicle sales have dipped during the first half of 2013 according to data released by the automaker. Sales during the six months ending 30 June have fallen from 1,328,053 units to 1,302,854 units, a decline of 1.9% year-on-year (y/y). Passenger cars sold 1,143,967 units, largely stable having dipped by just 0.1% y/y. However, its light commercial vehicle (LCV) products performed poorly with a fall of 13.3% y/y to 158,887 units.

From a brand perspective, the core Renault marque has made up the lion's share of the declines since the start of the year, down 4.6% y/y to 1,062,280 units. While it has benefited from the introduction of the Captur sport utility vehicle (SUV), Zoe electric vehicle (EV) and fourth-generation Clio, as well as surging demand for the Duster in India and Russia, older models – particularly those in Europe such as the Mégane and Twingo – have caused a substantial drag. It also has not been helped by the 15.1% y/y retreat seen by its LCVs. Another area of negativity for the Group has been its South Korea-based Renault-Samsung brand. This unit's sales fell by 12.4% y/y to 29,136 units. However, its low-cost Dacia brand has shrugged off any signs of negativity as the latest-generation Sandero and new Lodgy and Dokker have resulted in a gain of 16.5% y/y to 211,438 units.

The biggest issue for the Group – and something that is also affecting many of its rivals – remains the European market. Here, it has seen a decline of 7.3% y/y to 656,580 units. This is not helped by its domestic market demand, which is so influential to its performance in this region, having fallen by 10.1% y/y to 278,848 units. It has also suffered in Germany and Italy. However, there has been some buoyancy in Spain, which has been helped by the scrapping incentive, and the United Kingdom, where it has been helped by restructuring and the introduction of the Dacia brand at the start of the year.

Its important Americas region has also suffered negativity, with its year-to-date (YTD) total down 2.4% y/y to 210,142 units. The main driver of this retreat has been the Brazilian market where sales have slid by 7.7% y/y, as it lost sales due to a two-month closure of its Curitiba site in the country as part of its expansion plans for the region. Nevertheless, growth was recorded in Argentina which has partly offset the losses here and in Colombia and Mexico.

There have been improvements elsewhere though. Its Euromed Africa region increased by 6.7% y/y to 196,543 units, as improvements in Turkey, Algeria and Egypt offset a weakness that has appeared in Morocco and a decline in Romania. Its Eurasian market grew by 9.9% y/y to 114,189 units, as Russian growth rates during the period have been strong, although this has weakened in June. The Asia Pacific market has increased 7.8% y/y to 125,400 units. Despite sales in Iran almost halving since the beginning of the year and South Korea continuing to slide, this has been offset by its ongoing entry in India, where the number of vehicles sold has surged.

Outlook and implications

The rate of decline on a global scale largely reflects the fall in the number of fully assembled light vehicles recorded by PSA Peugeot-Citroën during the same period, which was reported earlier this month (see World: 9 July 2013: PSA's global light-vehicle sales remain sluggish in H1). Both automakers are suffering in the European market, but this is partly being offset by their success in expanding their businesses outside the region. Renault has managed to improve its share of sales outside Europe again, as it has been trying to reduce this dependency. For the six-month period, this stands at 50.3% compared to 53.3% achieved in H1 2012. It will be hoping to maintain this trajectory in future, even following the launch of popular new models in Europe which it will be hoping will ignite a sales recovery in the market. As a result, it is continuing to invest around the world in markets which it expects will give it the best growth rates. This includes India (see India: 17 July 2013: Renault-Nissan eyes 15% market share in India, plans to invest USD2.5 bil. in five years), Brazil, North Africa, Russia and China. The latter has been a long-awaited event, and the stalling of a decision to produce vehicles locally has meant that it has missed out on the significant growth rates (although it has arguably benefited financially through its alliance with Nissan). Nevertheless, the Chinese government has now given its approval for its planned joint venture (JV) with Dongfeng, and it is anticipated that the first vehicles will filter through in 2015.

Nevertheless, the international market comes with its own challenges in the short term. While there is every expectation that vehicle ownership levels in Russia will grow in the long term, sales during the first six months of this year dropped off as a correction takes place following earlier aggressive growth rates. In Brazil, where it has invested in expanding its plant to keep up with anticipated demand in the region, there is currently sluggish economic growth, coupled with higher interest rates to curb inflation, which could lead to higher unemployment and stagnant wages, affecting the vehicle market. Also, in Iran, where Renault sells a variant of the Logan and other models with a local partner Industrial Development and Renovation Organisation of Iran (IDRO), sanctions are starting to bite leading to a fall in demand. Renault is also being lobbied by US-based United Against Nuclear Iran (UANI) to end its links with the country or face penalties under US law following a presidential Executive Order, which came into effect on 1 July 2013. This is aimed specifically at the automotive sector and authorises sanctions against entities "knowingly engaged in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the automotive sector of Iran". This joins similar orders put in place for the energy and banking sectors in an attempt to curb the country's nuclear development programme, which the United States claims includes weapons. While Renault has little direct business in the US, the ripple effect could hit its alliance partner Nissan, something it would certainly want to avoid. PSA has already been forced to pull out of its interests in the country for the sake of its alliance with General Motors (GM). Despite this, IHS Automotive expects the Group to record an uptick of 2.7% y/y in sales to 2.48 million units this year, before breaking through the 3-million-unit mark in 2016.