Renault Group's global sales dip in January

After a positive improvement in its 2014 improvement, the Renault Group's sales have fallen as it opened its account for 2015. According to data released by the automaker, demand this month fell by 2.7% year on year (y/y) to 187,766 units. This was made up of 164,119 passenger cars, a fall of 2.9% y/y, while light commercial vehicles (LCVs) were down by 1.1% y/y to 23,647 units.

On a brand basis, sales of the namesake Renault brand stood at 139,621 units. However, this was a decline of 7.8%, as demand for both its passenger cars and LCVs slid. The most-affected name plates of the former have been the Renault-badged versions of the Duster, Sandero and Logan, which are sold in its International markets where it has suffered some of its biggest declines this month. This was also despite a positive month for the third-generation Twingo, fourth-generation Clio, and the Mégane which is having something of an Indian summer at the moment before its replacement is revealed later this year. However, the Group's other brands have gone some way towards offsetting this. Dacia sales increased 15.7% y/y to 42,398 units as while growth in Sandero demand has eased, virtually the remainder of its key models on sale have taken over. Its South Korean-based Samsung brand has also recorded an improvement of 17.9% y/y in January as its Renault Captur-based QM3 proves to be popular with customers, alongside an upswing in SM5 demand.

On a regional basis, performance in its largest market, Europe, continues to improve. Sales there have grown by 8.7% y/y to 113,458 units. Although its domestic market has fallen back 4.1% y/y to 40,835 units, other markets have been buoyant, including Spain, where its registrations have grown by 59.9% y/y as the automaker is taking advantage of the government-backed PIVE scrapping incentive, Italy, the UK and Ireland have improved 26.1%, 15.3% and 61.9% y/y, respectively.

Some of its other regional markets have also increased this month. Sales in Africa, Middle East and India have grown by 22.6% y/y to 21,608 units, as the Algerian market leapt 89.4% y/y, no doubt helped by the launch of the Symbol here, as well as making a 36.7% y/y improvement in Iran. However, it still appears to beun able to make much headway in India. In Asia Pacific there was 31.1% y/y gain to 7,233 units, as the gains at Samsung translated into increases in this brand's domestic market, South Korea.

However, this positivity was heavily offset by the weakness recorded in its Americas and Eurasia region. In the former, which is made up predominantly of markets in South America, the weakness in the Brazilian market has led to Renault's sales falling by 29.1% y/y to 15,389 units. The situation was compounded by the ongoing issues in the Argentine market, which have caused its sales to tumble 61.9% y/y to 5,617 units. This is despite improvements in Colombia and Mexico. The market in Eurasia has now contracted 21.0% y/y to 17,752 units, driven by a 31.7% y/y slump in Russia caused by the economic difficulties in the country. This was also not helped by a 14.6% y/y fallback in Turkey.

Outlook and implications

The sales results for the first month of 2015 highlight some of the biggest regional issues that Renault will face this year. One of these stems from its exposure to Russia, not only on its own account but also now through its majority shareholding in AvtoVAZ (which is not reflected in these results). The light-vehicle market here is currently facing a "perfect storm" of macroeconomic factors. By far the most pressing of these factors is the chaos caused by the devaluation of the rouble, which has lost around half its value against the US dollar since this time last year. This has put massive pressure on vehicle pricing, and the acceleration on the fall in the value of the rouble in December 2014 has led to a round of price rises. Despite the Russian government extending a scrapping scheme, the macroeconomic conditions simply do not exist in the country to give the mechanism any ability to move the dial in terms of the market's performance. As a result, reports suggest that Renault is already preparing to reduce production this year (see Russia: 11 February 2015: Renault to suspend production at Russian operations for three weeks – report) in response to this.

In South America, there are different factors to contend with. In Brazil, January brought with it the end of the IPI tax discount that caused a pull-forward in demand during December 2014. This has increased prices by between 4.5-7%. It is also being hampered by the fall in the rate of formal job creation and cautious lending, which is expected to hamper the passenger car market throughout the rest of the year. In Argentina, the market for car buyers remains an even greater struggle. The depreciation of the Argentine peso is straining consumers, and there is also little confidence that the introduction of a third phase of ProCreAuto financing programmes and revision on vehicle taxation will make a big difference to the market.

Even so, in Europe its performance remains buoyant, and its product line-up should become even better positioned with the launch of the C SUV Renault Kadjar (see France: 3 February 2015: Renault reveals new Kadjar crossover), which will join the already popular Captur. The company will also bring to market the latest Renault Espace, Laguna and Mégane which will further bolster its range. The automaker will also move forward with developing its presence outside this region, despite the pressures noted above. This year, Renault is expected to launch its new low cost hatchback for developing markets such as India and Brazil. It will also be putting the finishing touches to its new joint venture (JV) site in China with Dongfeng with which it will be able to gain access to the market without being hit by significant import taxes.

IHS Automotive expects that the Renault Group (excluding AvtoVAZ) will achieve a marginal increase in global registrations to 2.61 million during 2015. However, we also see global sales hitting over 3.4 million units during 2020, and almost 3.9 million units including AvtoVAZ.