Good morning, everyone. We are pleased to welcome you for the 2021 full year results of Renault Group. This presentation will be made by Luca de Meo, CEO of Renault Group, and Clotilde Delbos, Deputy CEO and CFO. This presentation is broadcast live and will be followed by a Q&A session. Luca, the floor is yours.
Thank you, Philippine. Hello, everyone. Thank you for being with us today, physically or virtually. I am very pleased to present to you our 2021 results. I think it's a very special day for the Renault Group. One year ago, as you remember, we reported historical losses, and today we're able to show you results that probably few would have expected from us. When you look at the numbers, you can see that we exceeded our Renaulution 2021 consensus. We are also at least one year in advance on most of our objectives. Namely, our profitability reached 3.6%, which is above our previous or is our 2023 guidance. We also generated EUR 1.3 billion of free cash flow. And our investment level is now on track.
In terms of percentage, we are within the bracket of 8.9, precisely 8.5%. We overshot our EUR 2 billion fixed cost reduction objective. Finally, we reduced our cash breakeven point by 40%, which is massive and more, actually, more than two years ahead of our schedule. We achieved all of that despite the very, very challenging environment, pandemics, semiconductor crisis, and inflation, you name it. I want to take the opportunity to thank all Renault Group employees, as well as our dealers, our suppliers, our shareholders, and big thanks also, obviously, to our customers that finally are the one that pay our salary. All this is the result, I think, of titanic work.
In the last 18 months, we implemented what I consider as being a structural transformation concentrated on six fields. First one was about setting up an agile organization, a modern organization. Second, securing commercial success, focusing on value. Reducing the cost, you've seen it. Restarting the alliance. We had the chance a few weeks ago to show, you know, a new spirit within our partnership with Nissan and Mitsubishi. Finally, defining an ambition, an ambitious sustainability strategy that we presented in the general assembly in April 2021. Let's start with our organization. To make it simple, we reoriented it towards the market. We reorganized the group around four customer-oriented brands with clear territories. Now, each brand is responsible for its commercial contribution and return on capital invested.
On top of that, we place customer satisfaction as a core driver of all our activity. We went further than that, promoting also a new mindset. First, we needed a best-in-class management team. So what happened is that we actually promoted 250 managers to the group top 1,000. A lot of new people in the management. 30 of them were strategic hires from high-level companies. Of these new hirings, I'm very proud to say that 50% are women. We can attract female talent to the automotive industry, which is a very good news. In addition to that, we're building a flatter and faster organization. We increased the span of control by 10%, and in 2022, we target to increase it by more additional 10%.
In the engineering, for example, under the leadership of Gilles Le Borgne, we have converted 30% of the management position into expert position since the beginning of 2020. All the cars that we have launched were actually above our expectations. Example, Arkana is a success. More than 60,000 orders in 2021. That's above our internal target. 60% of sales of this car are into the retail channel, and more than 60% of the mix of Arkana is on hybrid. We achieved a very high level hybrid comparable to the one of some of the historical leaders in this technology. The New Kangoo was awarded International Van of the Year 2022. In addition to that, our leadership in Europe was confirmed on the LCV van market with a share of 16%.
For Dacia is a great success. You have the boss, Denis Le Vot. Sandero remains number one in the retail market in Europe since 2017, with 226,000 sales for the whole range. Dacia Spring is also a good success or a great success. With 46,000 orders since its launch in spring of 2021. If you look also at smaller, you know, business we have, like the Alpine, the launch of the A110 S version supported its commercial success, and the sales of Alpine also, thanks to the exposure to the Formula One, are up 74%.
At last, I just want to mention that our order book is above three months of sales, and this is a 15-year high, and not only originated by the lack of components and products, but because people are ordering our cars. I want to point out the success of the E-TECH technology. For us, E-TECH is the hybrid, plug-in hybrid, plus the pure electric lineup. Everything is in line with our long-term Renaulution target. The volume of the E-TECH cars sold has grown by more than 50% since then, 2020. As a result, almost one-third of our passenger car sales are already electrified. What is important to mention here, that actually we have proven 2021 that we could. We have already succeeded in replacing diesel by hybrid at Renault.
Let's continue with our commercial policy. We transformed it in depth, as we promised. First, we have reduced the new models' diversity technically and commercially by almost 40%, 38% to be precise, which is massive. We also improved our product mix. In Europe, the brand E-TECH mix, as I mentioned before, rose by 10 points versus H1 2021 from 26%-36%, and the trend is actually growing. C-segment passenger car sales now represent one quarter of our sales. It is consistent with the ambition to align our mix with the arrival of cars like the Mégane, the Austral, the Jogger, and the one that will come to the level and to the mix of our competitors. Very important for our profitability and capacity of generating cash. The same is true about our channel mix.
In H2, retail accounts for 50% of Renault brand's total sales, up 10 points, which means that we are in line with the market mix. It was actually almost two-thirds in the last part of the year. Trend is growing. Dacia is the number three in Europe on the PC retail segment. Number three brand when you look at only the retail, which is also, you know, I think a very good result, and congratulations to Denis and the team. Lastly, for our new models, this is a reflection of our, of the quality of the work that we've done on the product and the commercial policy. High-end versions now make up between 65%-85% of the mix. We're pushing up the mix within each one of the model range.
As a result, our net pricing was improved by almost six points versus 2020. This new policy, as you remember, has already started, like, in Q3 2020. I think it explains a part of the jump in profitability. We made it, as I mentioned at the beginning, much faster and stronger than expected. We reduced our cash fixed cost by EUR 2.3 billion, of which EUR 2 billion are structural. This was one year ahead of our schedule because the target was set for the end of 2022. We also reduced our cash break-even point by 40%. Remember that our target was 30% by 2023 and not 2021. In addition to that, the cash research and development CapEx per vehicle was reduced by 40% for the new models.
Thank you, Gilles and the engineering team for what you have done. It means that today we almost do two cars for the price of one before. Finally, we reduced the development time by 25%, moving from four to three years. We are also now, I think, in a much better cooperation mode within the alliance. We're working to find together a solution to our next challenges. To start with, we clarify the alliance governance. We also defined a clear sharing of activities between the three companies to optimize the allocation of resources. Our roadmap is now very, very clear. Let me only mention a few example.
First, we have a common electrification strategy, EUR 23 billion of investment in the coming five years, in addition to the EUR 10 billion that we already invested, because as you know, we started pretty early with electrification within the alliance, both Nissan and Renault. Our battery strategy includes mass production, mass producing all-solid-state batteries by 2028. In addition to that, altogether, we will launch 35 full EV vehicles by the end of this decade. By 2025, with the addition of the CMF-B EV platform, so the small electric platform developed by Renault, the alliance will have an unmatched set of electric platforms covering all volume market segments, globally. Finally, by 2026, up to 80% of all the alliance volumes will be carried by common platform against 60% in 2021.
In 2021, we also set new foundations and new ambitions for our sustainability strategy. It is now embedded within the Renaulution. It is, in my opinion, a pragmatic KPI-driven set with short, mid, and long-term clear objectives. We committed to carbon neutrality in Europe by 2040, and globally by 2050. To get there, we use all the levers covering the entire life cycle from cradle to grave. In the circular economy, we are today recognized also by peers as a frontrunner. The Refactory shows our ambition. We plan to generate EUR 1 billion of revenues from circular economy by 2030. We'll also repair about 20,000 batteries and 120,000 vehicles on a yearly basis by then.
We will reinject up to 80% of the minerals recycled from end-of-life batteries into new ones. We are not doing this alone. We created a robust ecosystem of partners all along the electric value chain. As an example, our partnership with Envision AESC, Fordway, and Verkor supports our goal of equipping our vehicles with low-carbon batteries made in Europe. To close this chapter, let me confirm that we reached, or we think, because this has to be, of course, confirmed by the European Commission authorities, our 2021 CAFE target, and I would say also with a relatively comfortable margin. Being a responsible employer, it's a bit of a tradition of the house and is another pillar of our sustainability strategy. We take our responsibilities to accompany the shift of our workforces towards the future automotive value chain.
We do it with the ReKnow University, one of the highest or biggest reskilling projects in Europe. Our goal is pretty ambitious, training 10,000 people by 2025. In 2021, we already trained 2,600 Renault employees. We are on track to achieve the target. We also strive for equality and boost women empowerment, so we reduce the gender pay gap from 7% in 2017 to 1.7% in 2021, and we commit to reduce it to 0% in 2025. In the Group top management, we are aiming for 30% women in 2030, 35% women in 2035, and 50% women in 2050. It's pretty simple to understand. At last, we are transforming the group while staying true to our history of social dialogue.
We signed four major long-term trade union agreements last year in France, in Brazil, and in Spain, all without any social tension. As you can see from this chart, ESG and our sustainability strategy are now integrated in the Renaulution dashboard and fully embedded in the execution of our performance. The bottom line of all of this is pretty simple. We are achieving one of the fastest turnarounds in the recent history of the automotive industry. The figures presented by Clotilde will show it to you. If you compare this situation to what it was one year ago, just one year ago, it is fair to say that something a little bit magic is happening at Renault. We'll see actually much more happening in the month and in the years to come.
I'll give the floor to Clotilde and come back in a few minutes.
Thank you, Luca, and good morning, everyone. It is with some emotion that I will present to you today the financial result for the year 2021. Indeed, after six exciting years as CFO, I have decided to hand over the reins of finance to Thierry Piéton, who is here with us, who has been the Deputy CFO since two years. Thierry is a man of great talent, and he has many professional qualities behind his competencies, which are already very useful to the group management team and that we are forming around Luca. This change will allow me to devote myself mostly to the development of Mobilize, of the Mobilize brand with a simple goal, creating around RCI, a new generation car and mobility brand that aims at generating a fifth of Renault Group's revenue by 2030.
I will indeed invite you in a few weeks for Mobilize first Investor Day to disclose in more details Mobilize strategy. I will obviously continue to work intensely with Luca and all the management team to drive Renault Group, this great company, to the success it deserves. Now let's go back to Renault Group 2021 financial statements. I will give you first a brief overview of our 2021 sales. In 2021, Renault Group sold 2.7 million vehicles, down 4.5% compared to 2020. As you know, in the frame of our strategic plan Renaulution, we have changed our commercial policy and favored the quality of our business, meaning value over volume. This led us to give up some market share.
When you add a total chip shortage impact of 500,000 units on our 2021 production output, you have the explanation of this performance. I also would like to stress that the market has still not yet recovered to compare to 2019, with, for example, volumes in Europe remaining more than 23% below 2019 level. In Europe, our 2021 registration declined by 6.2%. The market was stable for the year, with a depressed market in the second half, down 22% on the last year. The Group performed in line with the market in H2. International markets have performed better than Europe, and Renault Group posted a 2.4% decrease. Our sales increased in Russia, our second-biggest market, and in India, taking advantage of the launch of Kiger.
By brand, Renault underperformed the group, losing 5.3% compared to 2020, while Dacia and Lada made progress. It is worth noting the strong performance of the LCV business, up 12% above market. I will now turn to the financial review. On slide 20, we show the revenue contribution by activity. Group revenue for the year was up 6.3% compared to 2020. At constant scope and exchange rate, it increased by 8%. Automotive revenue, excluding After Sales, increased by 7.1% to more than EUR 40 billion. After Sales contributed for EUR 2.8 billion, up 10.4%, partly explained by strong price increases and product mix for the 18 points which have more than compensated the 6.8% ForEx devaluation. Excluding ForEx, After Sales revenue were up 17.2%.
Mobility Services contribution amounted to EUR 24 million for the year. Our captive finance company, RCI, posted revenues of EUR 2.9 billion, down 6.5% due to the decrease of the average performing assets, stemming mostly from the Group strategy to optimize the network inventories. I will now review the breakdown of revenues for the automotive activity, excluding After Sales. The first item, foreign exchange, was -1.5 points on the full year, mainly related to the devaluation of the Turkish lira, the Argentinian peso, the Russian ruble, and the Brazilian real, with an improvement in H2. The next item, market, impacted positively for 4.4 points, with a negative impact of 9.4 points in H2, notably due to the European market at -22%.
The Group's volume performance stood at -7.5 points, with a 2-point improvement in H2 versus H1. As explained, this is the consequence of our strict commercial discipline, which has led us to give up some poor businesses, and of the chip shortage, which has prevented us to fully leverage the success of some of our models. The fruit of this policy can be seen in the 5.7 points of positive price effect. It shows how serious we are about improving the pricing of our cars, the quality of our business focused on the most profitable channel, and our will to protect residual values. In H2, the price effect was up 3.6 points, with a strong comparison base since this new policy was launched, as Luca said, in Q3 2020.
The product mix effect yielded a positive impact of 2.2 points, thanks to the success of our new C crossover, Arkana, launched in Q2 2021, the continuing strong demand for LCVs, and lower sales of some models with a lower revenue per unit than Group average price. The last bucket, others, contributed positively for 5.3 points. This unusually high impact is coming from the recovery of the spare part business and from the decline of sales with buyback commitments, stemming both from the decrease in short-term rental sales and disposal of some owned dealer assets. I will now turn from automotive revenue to the Group operating margin by operating sector. The Group operating result for the year was positive at EUR 1.7 billion or 3.6% of revenue, up EUR 2 billion versus 2020 and almost one point ahead of our guidance.
Our Group margin stood at 4.4% in H2 versus 2.8% in H1. I remind you that this performance has been reached with a loss of 500,000 units over the year due to the electronic components availability. The automotive segment, excluding After Sales, was positive at EUR 260 million, up EUR 1.7 billion versus 2020. After Sales operating margin was positive EUR 247 million, with a strong H2 at 9.5% compared to H1 at 7.9%. Globally, the automotive activity posted a positive operating margin of EUR 507 million or 1.2% of automotive revenue, showing an improvement of EUR 1 billion over the previous year. H2 margin reached 2% versus 0.4% in H1, and mobility services reporting an operating loss of EUR 29 million.
Our financing activity, RCI, delivered close to EUR 1.2 billion contribution to the group margin versus EUR 1 billion last year. Let's now look at the group operating margin variance elements. Renault Group's margin improved by EUR 2 billion in 2021 compared to 2020. As for the external factors, currency impact was slightly positive at EUR 8 million, with most of the currency recovering in H2 from H1. The Turkish lira continued to devalue, but it has a positive effect on the cost side, thanks to our export production based in this country. Raw material was a EUR 468 million headwind, strongly impacting H2, with -EUR 392 million, reflecting the current trend of higher prices of raw material, particularly steel, aluminum, and plastic.
Comes the volume impact from the market, which was a positive of EUR 0.3 billion for the full year. After H1 market recovery on last year's depressed level for EUR 0.6 billion, market posted a negative contribution of EUR 0.3 billion in H2. We have isolated the volume impact not related to the market development, but to our own market share evolution and sales to partner. It is a negative of EUR 579 million, but as already explained in the revenue analysis, this does not come as a surprise to us, and came from our commercial policy favoring volume over value, sorry, over volume, lack of components, and lower sales to our partners.
The mix price enrichment impact was positive by EUR 1,127 million, and showed the strong benefit of this pricing policy and channel mix discipline in Europe and overseas. This impact includes price increases to cover exchange rates, devaluation, and cost inflation. It also reflects the success of Arkana launch. Productivity gains contributed for EUR 852 million, and I will give you more detail in a minute. Afterwards increased in contribution by EUR 106 million, thanks to price increases which have more than compensated the negative Forex impact and raw material. I will comment on RCI performance in more detail later in the presentation. To finish this analysis, the last bucket, named Others, contributed positively for EUR 483 million.
The major contributors are parts and dealers activity recovery, the impact of the retreatment of sales with buyback commitment that I mentioned before, and some variation in non-recurring items from 2020 to 2021. Productivity posted a gain of EUR 850 million, as I just said, but it's mainly coming from the purchasing and R&D performance. Warranty costs have increased by EUR 38 million. R&D showed a gain of EUR 217 million in the P&L, thanks to a strict cost management policy. Manufacturing and logistic contributed EUR 69 million, thanks to productivity efforts and organization optimization. The change in amortization and capitalization ratio impacted positively for EUR 42 million, as the negative impact of a lower capitalization ratio from 49.1 points in 2020 to 44.5 points in 2021 was compensated by lower amortization, notably due to 2020 impairments.
Finally, support function G&A have been cut by EUR 21 million, reflecting our strict cost management. As Luca already told you, we have reduced our cash fixed costs by EUR 2 billion, one year ahead of our schedule. Each function's contribution was in line with expectation. Engineering has optimized the use of subcontractors, reduced range and diversity, increased carryover of parts, and prototypes cost reduction. Manufacturing benefited from convergent effect with the alliance, pushed for process standardization and optimization in support function and energy consumption. As for SG&A, we decreased thanks to fixed marketing expense rationalization, labor cost reduction, and cost optimization from the BU reorganization. As a result, the cash break-even point was reduced by 40% in 2021 compared to 2019, two years ahead of target, reflecting mainly fixed cost reduction and net price improvement. RCI.
RCI generated EUR 17.8 billion of new financing, up 0.4% when excluding ForEx impact, helped by the 7% increase of the average financed amount and by the strong performance of used vehicle financing contracts. Average performing assets amounted to EUR 44.8 billion, down 4.6%. This decrease is explained by the impact of the group strategy to optimize the network stocks. This led to a 23% average performing asset decrease related to the network business, which stood at EUR 7 billion for the year. RCI posted an operating profit of EUR 1.2 billion, up EUR 0.2 billion versus 2020, and almost back to 2019 level. This operating profit increase is explained by the cost of risk evolution, which strongly improved in 2021.
It's stood at 14 basis points of the average performing assets for the year, versus 75 points at the end of 2020. This very low level versus normal level is explained by the improvement in risk parameters, by return to normal recovery processes, which were impacted by the strict lockdowns last year, and by the decrease in outstanding assets in the network. Now that we have covered the operating margin variance, I will continue down the P&L with the other operating income and expenses items on the slide 27. Other operating income and expenses amounted to -EUR 0.3 billion versus -EUR 1.7 billion last year. Several items explain this strong improvement. The restructuring costs and provisions stood at -EUR 430 million, compared to -EUR 600 million last year, with ongoing plans, notably in France.
Impairments impacted EUR -401 million after the exceptional EUR -762 million booked last year, which was mainly due to revised assumption and decision to discontinue some programs in the frame of Renaulution Strategic Plan. Disposal of assets led to a capital gain of EUR 487 million, mainly from the sale of some own dealer branches, as announced in our 2022 plan. Continuing down the P&L, the next item is net financial income and expenses on slide 28. The net charge eased from EUR -482 million in 2020 to EUR -350 million in 2021. This improvement is mainly related to the accounting revision of the carrying value of the loan guaranteed by the French state. The next slide shows the impact of associated companies in Renault's P&L.
We have already published Nissan's contribution for the last calendar quarter in Renault's account. Therefore, Nissan full year contribution came to EUR 380 million compared to almost -EUR 5 billion posted in 2020. Contribution from other associates turned positive at EUR 135 million compared to -EUR 175 million a year ago when we had booked negative results from our Chinese JVs. I will turn back to the P&L. The net tax charge for the year came to -EUR 596 million versus -EUR 420 million for 2020, in line with the improvement of the results. Bottom line, net profit after tax came in at almost EUR 1 billion compared to -EUR 8 billion in 2020.
Now that the analysis of the P&L is completed, I will turn to slide 31 on the evolution of net automotive financial position. Cash flow from operation, including after-tax, but excluding disposal of assets and restructuring expenses, amounted to EUR 4.8 billion versus EUR 2 billion a year ago, reflecting the improvement in the operating performance and EUR 1 billion of RCI dividend payment. Net tangible and intangible investments came to EUR 3.2 billion, down EUR 1.9 billion from last year, mainly thanks to our ongoing effort to reduce CapEx and R&D spending. The EUR 3.2 billion investments included EUR 0.2 billion of leased vehicle impact due to higher de-fleeting of leased vehicles. These investments were largely covered by the automotive free cash flow.
Excluding the impact of asset disposal, the net CapEx and R&D rate amounted to 8.5% of group revenues. It amounted to 7.3% of revenues, including asset disposal, compared to 11.3% in 2020. Disposal of assets contributed EUR 574 million, of which more than half came from the sale of some owned dealer branches in Europe. They roughly covered the EUR 0.6 billion of restructuring expenses. Free cash flow before working capital requirement, for which we had given you an outlook, and amounted to EUR 1.6 billion. Changes in the working capital requirement had a negative impact of EUR 0.3 billion, despite an inventory reduction of close to EUR 1 billion. As a result, the operational free cash flow was positive EUR 1.3 billion for the year.
Net financial investment included EUR 1.1 billion from the sale of the share we hold in Daimler. Finally, Forex, IFRS, and others had a negative impact of EUR 324 million for the year. In total, our net automotive financial position improved by EUR 2 billion compared to the end of last year and stood at -EUR 1.6 billion. Consequently, the board of directors will propose to the AGM not to pay a dividend for 2021 financial year. The liquidity of the automotive division improved to EUR 17.3 billion at the end of 2021. In 2022, the group will make an early repayment of EUR 1 billion on the loan from a banking pool guaranteed by the French state, as well as EUR 1 billion related to the mandatory annual reimbursement, i.e., in total, EUR 2 billion.
The loan will be fully reimbursed at the latest by the end of 2023. Slide thirty-three shows the inventory situation in Renault's balance sheet and for the independent dealer network. As you can see, inventories have reached a historically low level, reflecting both stricter inventory management and the chip shortage. In terms of backward coverage, this led to 53 days or eight days lower than in 2020 and 15 days lower than two years ago. It's really low. Now I will turn back to Luca to give you the outlook for 2022.
Good. I also want to take the opportunity to thank Clotilde. I think this company owes her a lot, and I also owe you a lot, Clotilde. She has been enduring very difficult times at Renault, and I think that the credit of these results also goes to your contribution, your team contribution to Renault. I also wish you a lot of success with Mobilize. I think that the decision to fully concentrate Clotilde talent and energy on Mobilize shows how ambitious we are with this part of the business. In a few weeks, I'm sure you will be pretty surprised by you know, the level of substance that we have behind this story. But for the time being, let's keep it a secret. Of course, welcome, Thierry.
We know you very well, so I think we'll have a lot of fun. As Clotilde says, 2022, we're still facing the component shortage. From our understanding, it should impact particularly H1 2022. The second big challenge will be inflation. Raw material prices have strongly increased in 2021, and they will continue to strongly weigh, I would say, more than twice their 2021 impact. This is our estimation. On the other hand, I can guarantee you that we will continue to activate all operating levers to increase our competitiveness, and of course, we'll continue improving our pricing policy and reducing the cost. We think we demonstrated that we are able to do it, and we will continue.
We expect the market to be growing in Europe and Latam, where we are relatively, you know, strong and present. In Eurasia, in a non-sanction scenario, we forecast a slight decrease. With the electronic components crisis continuing to impact us, we estimate a loss of around 300,000 vehicles for the full year production, which will probably be very concentrated in the H1, and we see it, the H2 as basically an opportunity. At least this is the way we built the budget. Taking this into account, as well as the increase in raw material price, Renault aims at achieving for the full year a group operating margin equal or superior to 4% and an automotive operational free cash flow equal or superior to EUR 1 billion.
Let me say also that ahead of our Renaulution 2023 outlook, Renault Group will present its strategic and innovative roadmap at the Capital Market Day in the fall of 2022. I now want to show you how we are managing to turn Renault into a very competitive technological and sustainable company and how we will continue with that strategy in 2022. The group will continue, as I said, to improve its competitiveness. We're getting ready to take full advantage of a potential market recovery. Probably we'll be some of the OEM that will more benefit from this return of the demand and of course of the production when you look at the numbers. Even if we already significantly lowered our cost structure, we're not stopping here. Further cost reduction is planned.
We will keep the pace and go above the initial EUR 2.2 billion target. It will all allow us to leverage this sound cost structure when volumes will be back, but also because of the launch of very, very important models. Our real focus is now the competitiveness of our future lineup. I'm very, very confident on the, let's say, on what we're doing together with the engineering and with the design. All the projects are, you know, they look very, very good, if I may say like this. In addition to that, we will go on improving our pricing and commercial policy. We'll not stop here. Supported, as I said, by the launch of some cars, we have very, very important launches already in 2022. Let me be more specific.
We will launch seven vehicles in 2022, and this is the kind of a start of our C-segment push. First of all, the Mégane E-Tech Electric, potentially a market leader in EV. You have the new Jogger, which is a roomy and affordable family car, praised unanimously by the press. We have the Austral. This was for us the missing link because, for one generation we didn't have a competitive product in probably the most important European segment, if you combine margin and volumes. The Renault Kangoo, which, when it's EV version, will be part of our electric LCV offensive, but also will launch the Limo. This is the solution for cabs and ride hailing in the Mobilize, under the Mobilize brand.
Two key projects, products in Russia to complete this pretty, let's say, dense and colorful picture. If you look at the years ahead, I can confirm you that all the programs are on time. We are building. I consider, you know, being an old car guy and product guy, probably one of the best, if not the best product lineup that Renault has ever had, or at least in the last decades. Between 2022 and 2025, we will launch 27 new vehicles. This lineup will embody fully the Renaulution spirit. 50% of the passenger cars will be in the C segment and above. We are also boldly, I would say, taking the shift towards electromobility. We leverage our range of very competitive platform within the alliance.
First, the CMF EV will carry Mégane E-Tech, and then the future Scénic and the new Alpine GT crossover. The CMF BEV will carry the Renault 5 that you've seen, but also the successor of the Renault 4. On the CMF A, we will bring, and this is a decision we made this year, the successor of the Dacia Spring. Our LCV lineup will progressively become electric as well. Finally, under the Mobilize brand, we'll bring purpose-designed vehicles in the market to solve the profitability equation of mobility platform and to reduce the impact of transportation and last mile delivery in the urban environment. We have started to prepare Renault for the shift to 100% electric mix by 2030 in Europe.
We have all it takes to achieve this ambition, 10 years of experience in EV, a clear battery roadmap aiming at 65% battery cost reduction by 2028. I think with ElectriCity, one of the largest and most competitive EV production center in Europe. By 2025, we'll be able to produce up to 400,000 vehicles per year on two electric platforms brand new. In any case, I also want to say that the customer is always right. If the market doesn't get so fast into the electrification, at Renault, I think we have also a feasible plan B with all our competence and platform on the hybrid side.
Now that we think we put the company on track operationally, we are working on chapter two of the Renaulution. Today's changes in the automotive industry require that we move even further and explore new opportunities. That's why we're considering to the possibility of bringing together the EV specific assets and activity into a specific entity in France with a fully integrated system. This entity would rely on an appropriate business model and state-of-the-art technology that we already have in-house, mostly. At the same time, we know that ICE and hybrid engines will remain a significant part of the business, with different key success factors, in particular, industrial efficiency and switch to low carbon fuels. To tackle these challenges, we would consider the possibility to create an entity focused on ICE and hybrid powertrain, gathering assets and the activities outside of France.
The results of these discussions and the study will be shared regularly with the various bodies of the group, and information and consultation procedure will be set up in accordance with the regulation of the various countries. We will present our roadmap at the Capital Market Day in the fall that we announced previously. One of the major events of the year, the joint venture with Plug Power called HYVIA. First vehicle will be on the roads by mid-2022, and we target a 30% market share on the hydrogen LCV market in Europe by 2030. In addition to that, Renault is positioning itself, or at least this is our intention, as a front runner in terms of especially connected cars.
The Alliance already has more than 3 million vehicles connected every year to this cloud with permanent data exchanges. The next chapter starts with the Mégane E-Tech. For it, we co-develop software platform enabling Google Automotive Services. This makes us the first global mass market OEM proposing the Google ecosystem in its cars. Partnering up with the best tech players is at the core of our horizontal approach. All this is only the start of a move to extend upgradeability to new features. Thus, by 2026, 5 million cars will be connected every year to the Alliance cloud, and 25 million will have been in total. Finally, we have decided that we will launch our first full software-defined vehicle by 2025. This will be a breakthrough. Software-defined vehicles will allow us to propose new services to our customers.
We will be able to improve them over the air throughout their life cycle, potentially every day. They will remain linked to our after-sales and service system throughout their life cycle and keep their value, most importantly, over time, because they will be continuously updated. To finish, I am very pleased to announce that we will launch soon a concept car embodying our vision of sustainability. We wanted to materialize our vision of sustainability based on the three pillars, safety, inclusion and environment on one product. This product will announce a future product because at Renault, when we do concept, we want to turn that into real cars. It will be presented in a big event in May.
I want to give you just a hint that, you know, a new car is coming, and you might probably imagine which one. Of course, it will be electric, maybe hydrogen, maybe other things that we have included in this fantastic car. What can I say to conclude? Maybe I should say that Renault is back, and for sure, we are all determined as a team not to go backwards to the past. We are approaching the next step, I think, with confidence. Confidence in our ability also to navigate stormy weathers despite the challenges ahead. I think we've proved it in the last 18 months. We also know where we're going, and as you've just seen, we're already well on the way in turning Renault into a competitive, technological and sustainable company.
I would like to thank you for your patience with us and your attention, and I am now open to questions together with Clotilde.
Just two seconds.
Yeah. Hello. Hello there.
Good morning, Pierre.
Yeah.
Two questions, if I may. First one on pricing. Price tailwind has been super strong for six quarters. You mentioned in Q3 that comps were beginning to be a bit demanding. How should we think about the pricing into 2022 and 2023, especially when volumes recover?
Okay. Maybe I take this one if you-
Yeah.
If I may.
Can add, yeah.
I think if you look at the old story, actually we have anticipated price increase already, you know, in 2020. We continue in 2021. We did before the others, even before inflation kicked in. This is the reality. Yeah. I think we're more into a kind of, into a, let's say, challenged position last year. Now, we expect everybody to increase pricing, so we are in the condition to actually follow the stream somehow. We see it less complicated because it will not degrade our competitive position. Everybody's going up. Then there is another effect which is important, is that we're getting a lot of new cars kicking in.
Okay.
Normally, you can improve your pricing when a range is pretty young. Okay? We have cars that, you know, Arkana will have its full year. Jogger will have its full year. Mégane kicks in. Austral kicks in. I think mechanically we will have more chances to, you know, to continue this path. I don't have big concerns that we will, you know, go back even when the volume recover.
I would add that in view of the inflation that you see everywhere, I strongly believe that our competitors are gonna also increase prices. I think the trend of the market is in increasing price anyway.
Okay. Thanks. Obviously a hot topic today. Russia is your second biggest market. What's at stake here? How you see things going on? If the geopolitics were to toughen a bit, what would be the impact on the operation there?
Look. Let's say, of course, we're looking at that carefully because we have a lot of interest in evolution of the Russian market. I think that the team there did a great job this year. We can't guess, I think, what will be the future. You have to remember two things. One is that our AvtoVAZ operation, actually sales are 90% in the Russian market, only 10% to export, and it goes into all the countries around Russia. They are very highly localized products. Potentially, you know, it could actually be another supply chain, let's say crisis linked to parts that would have to come from abroad. As I said, especially LADA cars are very localized product in terms of content.
I would add that the companies we have in Russia, their debt is local and their financing is local, with no support of the Renault Group. They are fully self-sufficient, even though they are indebted, especially AvtoVAZ, obviously, but it's purely local. Also that is, in our view, are quite secure.
Of course, we hope that the situation.
Yeah.
will go in the right direction, like all of us, I guess.
Okay, thanks.
Thomas.
Hello, Thomas Besson. I have a few questions as well, please. Firstly, you had a big tailwind this year from used cars and parts, even if it's maybe lower than for the German OEMs, of course. Do you expect this tailwind to be still substantial, a few hundred million EUR, to your adjusted EBIT in 2022? Or do you think we've seen the best of that? That's the first question. At the opposite, you had slightly lower raw materials impact than we thought in 2021. Should we still assume the broadly twice what you had?
More.
4% or more for 2022? Do you think that you're going to be able to mitigate that with the everybody raise prices effect that we discussed? Finally, if I can, you usually give us vague indications, at least about the profitability by region. Is it possible to have an idea whether you effectively managed to break even everywhere in H2 with the 2% of the margin, or whether you're still loss-making in some regions? Thank you.
Yes.
This will be a structural trend because of the switch to hybrids or electric cars that are, you know, by definition more, let's say, expensive. I think we will see a kind of a golden era of used cars for a long time. We're trying to get. I mean, Renault has a long tradition in terms of we invent a lot of things in used car market as OEMs, and we're trying to get organized to really perform and to really interpret this business as one of the core business of the thing. I've taken the example of our decision, for example, to enter the heycar digital platform, the one that is like developed, was developed by VW and Mercedes.
It shows you that we are trying to look at this in a modern, progressive way and to make it, you know, a very important pillar of our business more than it used to be, let's say, in the past. We are really getting organized also to have a very professional manager of residual value. We see the residual value going up like this, and then, used car becomes a good business. Instead of getting used cars out of the system, we are actually thinking about how to reintegrate that kind of financial fluxes and profit within the thing. I think we will probably, if the topic is interesting, we'll probably be able to, you know, in some presentation focus on this topic within this year because we're doing a lot of stuff, and we believe in it.
On the parts, I think it's the same. On the parts, we'll probably see announcement of some structural changes in our strategy that will foster increase of business and of course, margin on the after-sale side.
To add on that point, Thomas, in that box in 2021, we did have a big impact from the sale of the from the buyback refinement because we had lower buyback, which we don't intend to increase, but we won't have the benefit of lowering still. With the sale of some our Renault Retail Group dealers that had a positive impact and some one-off, as I said. For your modeling purposes, it's gonna be a negative, most probably next year. On the raw material, you're right. I think we've been quite able to retain some of the price increase in raw material in 2021. We were clearly with an average price below the market price.
In our view, it's gonna be more than double next year because we were, I think, a little better than what the market was in 2021. As for profitability for region, we don't communicate on that because we don't follow it on that way anymore. Nevertheless, we look at it. I can't tell you between H1 and H2, but I can tell you that all region have progressed considerably. Most of them are above the group average. The exception is Asia-Pacific, where obviously in China and Korea, with not being full, it's more difficult than in other regions. All the rest has returned to good profitability level in average for the Renault Group.
Thank you. Philippe Houchois, Jefferies. I've got a first, a simple one. On the dividend from RCI for next year, you guide for the group to do more than €1 billion on the auto division. In your balance sheet, RCI is still unlevered. You could easily pay another €1 billion. Is that or I think my numbers are-
No, it's, yeah, it's not the assumption.
Yeah.
We indeed have an assumption to continue to pay, as you rightly mentioned, because we have the capacity to do so. Obviously, it's always depending on the approval of the European Central Bank, but we intend to pay something slightly lower.
Mm-hmm.
Mostly around EUR 700 million-EUR 800 million.
Right. That's built into your
Sure. We said.
Decent for, yeah.
Up or above EUR 1 billion, right?
Exactly. No, very clear. All right. I've got another one a bit more complicated or I struggle with it. It's more about the market. I look at Europe over a period of time, 2019 previous peak was below the peak of 2007. For me, there's structural decline in European demand.
Mm.
More than we see in other markets, possibly. I'm kind of looking at and possibly some segments that we're used to in Europe, the A segments are kind of going away. That structurally makes it impossible to return to previous levels. I'm kind of curious about how you see that, if I'm right or wrong. Also, how you see the fact that I look at your most successful competitor anywhere is Tesla. They go after volume with very few models. Is that the new
No, it's not possible.
No. iPhones are white or black. You know, is that a trend that you think is something that's part of your thinking? Do you need 20 models, you know, you need to replace the 20 models you had in the past, or can you be much more efficient with fewer models and higher volume? The last point that kind of goes into that is, I fully understand what you're selling to your dealers now, and it's to offset the restructuring costs. At the same time, a lot of the industry is moving towards direct selling. I would have thought having your own dealer network might be a niche if you're going to try to sell cars directly. How do you balance, or what am I missing in there?
It's just a bit of retrenchment first because you need to fund the restructuring or how does it fit into a longer-term strategy for the market?
Of course, you know, of course, Europe has always been a pretty, you know, complicated, complex, and mature market. It's not, it's nothing new. It is true that we don't expect European market to structurally explode like, you know, some other emerging markets in the last 20 years. I think we have a solid market share in Europe, and we still have potential with the new products to reconquer some share. It's gonna be complicated. We also see the. Let's say, we also have to integrate into your equation the switch from ICE to electric, which will make the equation even more complicated. I think we know the market. We know better than many others because that's our own turf.
Exactly, we are preparing to that. We believe that there will be a strong switch to electrification because of the regulation. Europe will probably be one of the places where, because the rules of the game, electric will go. We know that hybrids will play a role, but we're prepared to that. You know, that's life of an OEM. On the second one, it's clear that last year when we presented a solution, let's say, strategics on the product planning, we are taking the opportunity, or we took the opportunity to make our range more efficient. Okay? Not only technically, and you've seen the results, so look at 40% less to produce the same car.
It means that you made a lot of work on cost reduction, but also some decision fueled that kind of result because we've been very, very efficient. Some programs, we do five, six cars with more than 80% carryover, which we didn't do in the past. In general, the range will be much more focused, and we'll try to go into segments where there is volume and margin. Okay. That's the thing. If you look at what was the plan before and what it is today, I think we will have one of the most, let's say, efficient ranges in Europe. Coming with the electric wave, it will probably be even better. Okay. We're kind of somehow following the example of the brands you mentioned before.
We have a lot of good questions online, and
No, I have one to-
Oh, sorry.
On the distribution. Look, we actually had 200 own dealers. The old system was loss-making. We decided. We actually sold 25% of them this year, and we'll continue to do that, but not completely. The one that will remain will represent the best of the best at what we can do in retail. These will be the places where we will show to the rest of the dealer body what are the processes, the technology, the experience that we want and to set the standards. The other big discussion is on the distribution. It's not only to own and to control the thing, but it's who owns the stock and different models.
We are not going into this direction, at least for the main brands, because we believe that we are not in the condition to bear the weight of owning the stock in billions, okay, which the agency model somehow forces you to do. Okay? We believe that we have potential to reduce the cost in distribution. We're doing actually that, even for the dealers. We are building a business model that is one of the most attractive amongst the volume OEM by allowing the dealers to concentrate on the things that really matters and get rid of the costs that are absolutely useless. I consider the dealer body as a key partner of my activity, and I will continue to think that our job is to give them the tools and the ability to do good business.
I think it's better.
We'll now take some online questions, and we'll start with Dorothee Cresswell from Exane. Dorothee, the floor is yours. You can open your mic.
Many thanks. Can you hear me?
Yes.
Yes.
Perfect. Thank you. Hi there. I have two questions. One is around investment and depreciation and amortization. It seems that you've become much more efficient when it comes to investment spending. Could you give us some feel for the absolute level of CapEx you're planning to spend on PPE and R&D in 2022 and 2023? And then just as a reminder, can you tell us why was there this sharp decline in D&A this year, particularly in the second half? Because I think initially we went into the year thinking that would be a headwind. My second question is a longer-term one. Could you just outline your plans for China a bit?
We've seen you scale back your activities in the region, but you've also said in the past that it remains important for you to have a foothold there. What's your latest thinking around that? Perhaps you could also tell us whether the budding relationship with Geely in South Korea could be useful in that context. Thank you. Clotilde, all the best for the next role.
Thank you. On the investment, I think for now, I think you should take it as assumption that we would be rather flat in this year versus last year. We were at EUR 3.8, EUR 3.9, basically. We are where we wanted to be faster, but we don't intend to continue to drastically reduce the R&D and CapEx because we need to fuel the midterm plan and all the nice cars that we have in the pipe. On the depreciation and capitalization, as I mentioned, there are diverse forces, if I may say, because you have a negative clearly of more than EUR 100 million due to the reduction in capitalization rate.
That's the negative part, which we did not anticipate so sharp, by the way. It's true we guided for a negative impact still for this year. That is fully true. Now, what we probably hadn't really correctly assessed was the impact of the impairment that we've done last year, and also some elongation of the duration of some cars in view of the current context. All in all, I guess you have a positive impact of, let's say, EUR 150 million this year on the amortization net of the pluses and minuses.
It should turn back negative next year, obviously, because as we continue to invest, it's gonna be a negative next year and probably around 0.2 points next year on the COP on the operating margin.
Two questions on China and Korea. Start with China. I said last year two things. One is that, you know, a brand that sees itself as a global brand, can't avoid being somehow in China. The second thing that I said is that it would probably take us a few years before fixing the issues and the problems we have there based on the previous strategy that didn't work and to re-enter, you know, with a new approach. A few interesting things happened. In the meantime, we are kind of recharging, let's say, the cooperation with Dongfeng that produces the Dacia Spring. The success of the product is obviously creating a better, let's say, relationship and mood between the partners.
It's a company called eGT. We have also just launching the Mobilize Limo in our JMEV operation. We'll see if the project works. I think there is a potential for that. Third, we are in a restructuring process of our LCV unit called Renault Brilliance Jinbei, which is running for what a restructuring process can run, let's say, I would say pretty smoothly. But we're still working undercover with the idea that if we gotta go back to China, and one day, I hope it will happen, we'll have to bring something that doesn't exist there. We will have to go directly, not even to the 5G, probably to the 6G.
That's what we have to do if we wanna have a chance to succeed in a market that is becoming one of the front runners on many of the technology or customer demands, and where sometimes you feel whether it's a more comfortable position not to be there and have the chance to start from scratch or being an incumbent in China with all the assets. I feel that we have an opportunity, if we do it right, to bring something additional to the equation, something new to the Chinese consumer, and we will work for it, and we'll probably come with some news in the next months. The cooperation with Geely is also part of reestablishing a certain presence and reputation within the Chinese ecosystem.
We're very proud of being able to work with Geely because it's one of the best OEM on the planet right now with a lot of technology and a very ambitious strategy. The deal with Geely is very much focused for the time being on Korea. I'm sure you have discussed in many of these similar events during the years, you know, the issue of Korea. We actually had no possibility, considering the product plan that we have, imagined to really bring something to Busan, okay. Also because the Korean market is very focused on D-E segment cars, which are not the specialty of this house, okay.
I think that the deal with Geely is a fantastic opportunity to, you know, leverage this asset and to secure the entity of this plant. I think you have to look at that as a, you know, pragmatic way of making sure that those few thousands of colleagues and employees and engineers and workers in the plant can look, you know, at the future with optimism. I thank Geely for this, for their generosity in this respect. I, you know, keep motivating the people there because I think we have obviously a challenge, but we have also now a clear roadmap ahead of us. That was a major thing.
Maybe, you know that closing a plant like this or not finding a solution for that would have been a huge impact for Renault. This risk, let's say, at this moment, is off the table, and it's off the table, and this is good news for Renault.
Another online question from Goldman Sachs. George, you can open your mic.
Yeah. Thank you for taking my questions. The first question, I just wanted to follow up, just on Dorothee's question, if that's okay. Just setting aside the R&D capitalization and amortization and focusing on the depreciation, if I look at the depreciation specifically, it looks like the second half was about EUR 250 million lower than the first half and roughly EUR 375 million lower than the second half of last year. Am I correct to understand that you do expect the depreciation to step back up in 2022? The second question I had was just on the purchasing savings. Obviously, you're seeing very good progress here, and also it looks like very strong sequential progress.
If I look at the purchasing savings as a number per unit sold, it looks like it was around EUR 123 per unit in the first half, but as high as EUR 370 per unit in the second half. Is that second half level sustainable as we look forward, or do you think you can actually achieve more on the purchasing? Thank you.
Yeah. Thank you, George. On the depreciation, I'm not sure I get to the same numbers, so I would propose to take offline this explanation with the team on the numbers for H2. It doesn't ring a bell to me. On the trend for next year, yes, you're right. That's what I said before. You should forecast globally for R&D, depreciation and amortization globally, something which is increasing with an impact of around, I guess, 0.2 points. On the purchasing saving, it's true we had a good performance in the second half, but you have some very good job from the team there, which is linked to all the work which has been done in order to rethink and re-engineer the,
Mm.
Uh-
Yeah.
Exhaust-
The exhaust system.
Thank you. The exhaust system, which has been done a few years ago in a hurry, I would tend to say, in order to meet the regulation, which was coming and strong. By looking more in detail, the team realized that it could be improved drastically in order to reduce the consumption, notably of precious material. The work has been done late last year, beginning of this year, but the impact on the P&L is mostly in the second half, and that's a big impact, which is a process that we do usually is to review constantly how we could improve the parts in the cars which are already in the streets, the cars which are already produced. Here there was a big bucket that came into benefit, I would say, in H2.
thinking of
That will continue, obviously.
They will obviously continue that type of exercise, and they are trying to look for good big buckets like this one. But on the purchasing side, I would say, yes, we do believe that we're able to continue to have a good performance, but the input cost, because we talked about a lot about raw material, but if you look at energy and freight, which goes directly also in what we buy, it's gonna be quite a big number next year. I'm afraid some of the productivity effort that we're gonna be doing both on purchasing and manufacturing might be eaten in some parts by this input cost increase. Good performance per se, but headwinds on other elements that goes in the same buckets, if I may say.
Very, very interesting explanation. Thank you for all the detail. Clotilde, best of luck in the new role.
Thank you.
We have another question from HSBC. Henning, the floor is yours.
Hi, good morning. Thank you. I just wanted to clarify, please, what you said around the volume. If you could maybe quantify the volume that's attributable to the deliberate market share declines, as opposed to the 500,000 units attributable to the semiconductor shortage. Also, with reference to the 300,000 units that you mentioned in your guidance for next year, can we sort of see the 200,000 unit delta as a change year over year, or are you intending further deliberate, I think you called them poor pockets of market share to give up? That's my first question, please.
Secondly, just on the profitability of the hybrid, I think a few quarters ago you showed us a chart where the hybrid profitability in terms of contribution margin, even though I believe it was for the B segment specifically, it was only going to break even, profitability of ICEs between 2022 and 2023. Considering the higher share of hybrids now, I wanted to see if that was still the case, or if you have become more constructive on the profitability of hybrids. Thank you.
So you want me to-
You can start and Luca can reply.
I think that it's very difficult to make the part between within the 500 what is the part that we lost based on kind of renouncing to some of the channels and then the one we lost for components. We've made some estimates, but actually I don't think they're completely accurate, right, on this one. On the 300,000, that's our estimated visibility. It's true that this whole semiconductor supply chain issue is not very transparent still. We have learned to be a little bit skeptical about you know promises that are made et cetera. We're getting more and more organized to keep the machine under control. Everybody it's actually let's say stating that it
We are almost at the end of this, that maybe, let's say in the H2 of 2022, we get to normal. You know, looking at the speed of this, we believe that 300,000 losses is potentially a kind of a centered value. On the hybrid, yeah, we keep working. I think that, I mean, the result is the profitability that we're showing. If we are able to do that profitability with a very high mix of hybrids, take the Arkana for example, it's 60%, let's say, hybrid mix and more, and this is a very, very profitable car, probably the most profitable we have in the passenger car range right now. It shows that the technology is competitive.
Don't forget that E-TECH is a very unique technology that also has a potential to be one of the most competitive in terms of cost, because we actually don't have a gearbox inside. Normally, they're very expensive. The whole thing is done with two electric engines. Not to kind of combine the electric part with the combustion. This is structurally something that will allow us to have E-TECH being a very, very competitive technology in terms of cost. Yeah, we feel that. I mean, when I came here at Renault, one of the things that was like, kind of very positively surprising to me, I didn't have a lot, I have to say, but a few because of the situation we were living eighteen months ago.
The all-electric story and the hybrid was like, I was very surprised by the quality of the work that had been done before.
Sorry, Luca. Thank you. Just to clarify, so in terms of the deliberate market share reductions, you are done with that, are you?
Yeah, I think.
Are you anticipating over and above the 300 for next year?
Yeah.
No, I think that we've cleaned up the channels, if I may say like this. In fact, what's happening is that, you know, when you push and then you start to get, I don't know, for example, self-registration out, short-term rental out, then you go into, you know, big accounts, which are the most costly channels for us. What happens is that they come back because they need cars. You have, you know, some argument to rediscuss, you know, the pricing of the thing. What we're gonna do is probably look at opportunities, but there's one thing we're not gonna compromise with, is we want to increase the profitability of this house.
We're not gonna do whatever just for the sake of pushing metal into the market. We have, you know, reduced the right size production capacity. We are organized for that. We're gonna try to go back also in some channels, because it's a good thing to sell cars to big companies, et cetera, but we wanna do it in condition that will allow us to give them competitive products at competitive price, but also we need to make money.
Mm.
It's very clear. It's very simple.
Thank you.
We come back rather than, you know, we step back.
We have another question.
Right.
from Bank of America, Horst.
Great hat. Great cap.
Good picture.
Yeah. Good morning. Thanks for taking my questions. As you see, I'm dedicated to Renault.
Yeah. Fantastic.
Just
I actually don't have this one. It's cool.
I bought it in Munich on the trade fair when I saw you there, Luca.
Okay. Okay.
Okay. On the questions, I have got two, please.
The first one is more about cost cutting. Since you achieved now your targets early, I want to understand what potential is still left basically from here on. Or is there the need also to fine-tune the targets just because the volumes are now lower than that what you thought when you presented the plan initially? In that context as well, on raw materials again, so you say that it's gonna more than double in 2022. I just want to be clear, we should not expect that these costs could maybe even triple because the base is now lower than you presented for 2021. Am I right in assuming that the raw mat target, I mean, that does not include energy and freight, and you said that could increase significantly. Could you specify that a little bit?
Also lastly, on the supplier cost, because all suppliers tell us basically they pass on cost to the OEM, since they guide for something like 5% pass on. Is that also included in your raw mat cost guidance? You know, what should we expect here? Thank you.
You wanna take it?
Yeah, I can. Yeah, on the cost cutting, obviously, as we said, we don't wanna stop here. We've done a big achievement in two years, so don't expect the speed to be the same. I believe that we still have to reduce our cost base. There's still opportunity to do so. As the low-hanging fruit obviously have been done, but we still need to continue. Remember what we said during Renaulution is that we're targeting for 2023 EUR 2.5 billion, including EUR 300 million of variabilization, and EUR 3 billion for 2025. We're working on that, including on the variabilization. You saw that we started with the sale of some branches of our dealers. We have some other ideas, but we're working on that. You can say...
We can think that it's gonna be the road again.
Yeah
Confirmed from what we said in Renaulution. On the raw material. Well, more than two, it's difficult to know because it's true that we have booked already a big portion of our steel purchases, but it's not the case for all the material, especially the indexed raw material. So from what we say today, it's a good comfortable more than two. I don't know if we could go up to three for the moment. Energy and freight, you're right. It's not in that box. In our current, maybe we will portray it differently if the increase is big in 2022. But it goes in the productivity box, and it's a few hundred million EUR also. On the supplier, maybe then I turn back to you, Luca.
My supplier, I mean, if they are so, let's say, kind of bullish about they're passing all the cost to us, I mean, that's not what they tell us, but so because we are. That is, like, obviously a kind of a battle to share the pain into the thing. I have the. Obviously we have, with the relation with that, we have with some of them structural relation, we're trying to negotiate that. We have to take care that suppliers also make their margins. On the other hand, we cannot, you know, screw up all our competitors. This is the typical fight between the purchasing and the supplier since ever, okay?
it's the discussion is very hot these days because sometimes we're seeing, you know, materials going up, very, very quick. It's not for them as easy as they described it, because obviously we don't want to take the whole burden of that. That's a reality.
It's included in the guidance, Luca, right? This
Sure.
Yeah
parts from suppliers.
Yeah, yeah.
Our assumption-
Yeah.
All what we discussed before, raw material.
Yeah.
Energy, freight, market share, EC crisis, everything is included in the guidance, obviously.
Yeah.
Okay, great. Thank you.
We now have a question from JP Morgan. Jose, the floor is yours.
Jose.
Good morning. Thank you very much.
Hola.
Clotilde, my very best wishes. Thank you very much.
Thanks.
Clotilde, my very best wishes for your new role.
To me, nothing, Jose, but no wish-
No wishes to you. All the wishes to me.
Luca, yes. Well, congratulations on the strong quarters, I think, absolutely. Just a couple of questions, please. On cash, can you talk a bit about the restructuring cash outflows, 2021 and 2022? You know, what did you see in the second half of 2021 or just 2021 full year? And then what are you expecting in terms of restructuring cash outflows for 2022? On cash as well, please, do you still see or do you see a working capital opportunity? I know production has to come back, but it looks like we have still more than EUR 1 billion of opportunity on working capital, particularly in payables. Luca, please, when we think about CMF-A and Dacia, what kind of opportunity is this for you?
I think this can drive incremental cost savings as you put Dacia on this architecture, if you could speak about that. Also, I know the Austral, you know, it still needs to be launched, but some of the initial details that have come out suggest this is a game changer. The car, the vehicle will be larger. So can you talk a little bit, maybe not so much about the car that's coming now. Obviously, you have to keep the details for yourself, but a little bit, what is the opportunity in this segment? You mentioned before that you were not, you know, you didn't have a competitive product in this segment, and obviously some of the details are coming out, you know, clearly point in the direction of being a large game changer. Thank you.
On the cash, Jose, it is relatively level between H1 and H2, with a different distribution. If I may say, in H1 it was mostly France with the voluntary departure plan and the early retirement plan, but also Korea, where we had to adapt the structure in view of the lower volume following the Rogue's production stop. In the second half, it was almost completely France because we launched a second voluntary departure plan. We announced a second voluntary departure plan and an additional early retirement plan. It's more France which is at stake. In terms of 2022, we're gonna continue to pay for the plans which have been announced, especially the early retirement, because as you know, it's over.
You may know, it's over three years. You could take as an assumption that it's gonna be slightly above, let's like EUR 100 million above next year in terms of cash out. In terms of the working capital, you're fully right. As you well know, Renault working capital is negative. When the volume is gonna come back, which was not the case in Q4 because it was a big hit from the chip crisis, we're gonna have a reverse on the working capital, especially as you mentioned, on the payables. Also to be mentioned, we have not finished with the inventory.
They were very low this year, but we're still working on the how can I say, structural reduction of the inventory thanks to lower diversity, thanks to better supply chain, et cetera, et cetera. All in all, we do expect next year to have a positive working capital, provided the market is where we think it's gonna be in Q4, which is early to say, but it should be positive.
We've done a lot of work, José, on the stock. Not only because of the lack of components, we did a lot of work to clean up the whole supply chain, kind of a 360 holistic approach to the end-to-end supply chain. One of the things that I'm more happy about is that, for example, we lowered down all the stock, so the quality of the stock is actually very good, and we will continue to do that. We're investing in tools, and IT, and organization to really make sure that this house works with a very low level of stock, avoiding peaks and downs and landings and stuff like this.
that will be one of the, let's say, project of the year that we wanna really execute. you asked me a couple of question on the product. I think with the CMF-A EV, we probably have the most cost-effective and competitive small car platform on the planet, basically. It comes from, you know, the work that was done a few years ago for India and other country, and the adaptation that was made of this platform to EV is actually pretty spectacular. I mean, I don't know if I'm correct, but I think the Spring was last month the number one electric car sold in France.
This is kind of, you know, you wanna have a buyer for the OEB EE-EV, you buy that and, you know, it's a way for a lot of people to access to EV. It's a very sharp, clear positioning of the thing. Actually, with that at less than EUR 16,000, we are making money, because otherwise my Dacia would not be so profitable with the car that's coming from China, with all the logistics. Imagine the advantage that we have in terms of cost. We will have to evolve this platform because you have, you know, new regulation coming in, GSR2, the demand for connectivity, for man-machine interface. We have in the oven a very nice success for-
Hmm
For this product. We believe that maybe A-segment combustion engine cars will disappear from the market because regulations are very penalizing for them. Maybe the only way for the A-segment urban cars, a second or third car in the household to move around and to bring the kid to school, electric is a good concept. I think the market will survive as an electric market. On the Austral, I also think that for us, I'm not... I don't know if it's a game changer in general, but for sure it's a game changer for us because C-segment SUV was a big hole in our range and our offer. We are using one of the most, let's say, of the biggest platform in the industry.
This is the platform of the CMF-CD of the Alliance. I don't know how many millions of cars on that. This is, you know, the brother of Qashqai, X-Trail that are sold, or Rogue that are sold around the world, also from Nissan. So we think we have a very competitive base. I'm not sure I can say everything, but we will actually present the design of the car on the eighth of March. You will see it's a very nice product, interior and exterior. We will obviously bring the new infotainment system that you've seen on the Mégane. A lot of ADAS will be introduced in the car. I'm just gonna give you some news, but I'm sure the guys from communication will kill me.
We do 105 grams with the 200 horsepower E-TECH engine on a C-SUV with that car. It tells you know, the quality of the concept. We're confident, and we think we can fill a hole in our thing, and it will bring additional volume and margin. You know, let's see what happens. It's also very competitive, let's say, segment. I also have to say that there will be not one but three cars on the same platform. Okay?
Now I have a question from Gabriel Adler, Citi.
Hi. Thanks for taking my questions. My first is on the free cash flow guidance. I just wanted to come back to the guidance here because if we put everything together that we've spoken about already on the call, higher earnings this year, investment flattish, the strong working capital inflow, given the negative working capital, offset maybe by lower RCI dividend and slightly higher restructuring, then the guidance for greater than EUR 1 billion seems very cautious to me. Is there anything I'm missing here, or would you agree that the EUR 1 billion free cash flow guidance should really be considered as an absolute floor here for 2022? My second question is on a comment that was made around the order book during the presentation. You mentioned that the order book is now at a new high of over three months of sales.
Obviously, this is partly reflective of the supply environment. How do you think this order book level could trend as supply normalizes, and what steps are you taking to operate with a higher order book more structurally in order to support pricing within the business? Thank you.
On the cash flow, two negatives versus this year are RCI dividend, as you mentioned, but also the asset sales. We have a plan to have a good number of asset sales, but with asset sales, you never know. We prefer, and especially some are scheduled for Q4, so with asset sales, you never know if it's gonna be Q4 or Q1 of the next year. All the rest you're right, should be either flat or positive. You know me, when I announce a number, I wanna be sure that we reach it. It's a floor. It's definitely a floor.
If we have what we think in terms of economic crisis, raw material spike, that we will definitely be comfortable with this guidance, clearly. That's all I can say.
On the order bank, we are much higher than three months, in fact. It's good on one side, it's not good on the other because customer have to wait a lot. We're trying to position the product in the right market, in the right segments with the right version to obviously maximize the profitability for us, that we've done, and you've seen the results. A normal situation will be that you have a order bank, slightly higher than two and a stock which is slightly lower than two. That's what we...
I remember when I came here, we were in a completely different situation, and we work hard, and very quickly we get to that balance, and then you have, you know, EC crisis coming in and also the demand, it's picking up. Yeah. The good thing is that demand is there. We don't have a issue of demand. I don't know what the other competitors are doing, but we don't see problems in the order intake. Of course, when you have to wait maybe months and months for a Renault and a Dacia, the people are probably going somewhere else, but I'm not sure that they also found the cars. Maybe they buy used cars or, you know, they keep their car for a longer time.
We don't see problem in demand. We have to rebalance that. We have to rebalance in that dimension, 2+, 2-. Okay? That's a good number.
We have a question from Stephen Reitman, Société Générale.
We can't hear you.
Do you want to take the next one?
That was an easy question.
Thank you for taking my question. Two quick questions. Just Luca, can you just sort of maybe what's the dream at Renault in terms of size, where you wanna be, right? This was a 3.9-4 million company. One of the big mistakes was to think that we could go to five.
Mm.
Right? Now we're at 2.7.
Mm.
What is the right size for this company, and where can you be most profitable? Right. We're not going back to 3.9% in the short term. Europe is not going back to where we were. Can you talk about that a little bit? Then the flip side of the question is, I think if I was investor right now.
Mm.
The industry globally is more profitable today than it's ever been before, right? These conditions are crazy.
Mm.
Right? You know, you're now at cash flow positive, which is wonderful, but you're not as profitable as a lot of your peer group.
Mm.
Where is Renault gonna be if this industry isn't as helpful as it is at the moment? Right. What happens at that stage? Right? That's what a lot of investors are gonna be asking. You know, this is a great performance by Renault considering where you've come from, but maybe things aren't gonna be quite as easy at some stage, you know, going forward. And easy, sorry, that's a, it's a really terrible word for me to use, but the market environment has been friendly. The pricing environment has been very helpful, right? That's not always gonna be the case. Those are the two kind of questions.
Don't say that.
So the dream-
Don't say it has been easy.
Don't say that it's been easy. I think I mean, I'm 30 years in the industry. I think I've never seen a combination of so many, you know, challenges altogether. We can say what. At the end of the day, the automotive industry stays a volume industry. When you lose, like, 25-30% of your volume, or you go to 0 production in a semester, like, because you have lockdown, you can't say that this is easy. Yes, we're trying to me and the teams and all my colleagues and others try to take advantage of the opportunity that we have, scarcity on the production to actually clean up a little bit the thing. But this is also proof.
When I remember one year ago was saying, "Yeah, we have to go from volume to value." Okay? People say, "Yeah. Yeah, volume to value, but, you know, you gotta do volume." We proved that we can do a little bit less volume, but create much more value. Okay? Now for us, the next step is to do value and then a little bit more volume because but in a healthy way, because, for example, the new products are coming. You have to understand, we got hit by all the situation 2020, 2021, in a moment where the lineup of Renault was not particularly strong. Dacia was pretty strong, but Renault had only a couple of competitive products in the B-segment, et cetera.
Now we are taking advantage in. You know, I think between 2023 and 2025, we'll have probably the best range of cars. Is Renault gonna be 3.5, 3.3.25? Right? It will be better than today. Okay? It will be better than today. That's my feeling. What we wanna do, the dream is not about. Of course, we wanna grow and I think that we need to be in the markets where we are present. We cannot be a second-level player. Okay? But it's never gonna be an obsession for the volume. The volume should be, let's say, the consequence of a good work that we do. We will focus on profitability, on better segment, on better markets, on better product.
The other thing that I have to bring back, together with my friends on the technical side, et cetera, is that we have to bring back technological innovation in Renault. Yeah? Because that's what counts, okay? I think we have the competence, we have the, you know, the means and the resources to do it. So you will see Renault much more, you know, front runner on a few things. We can't do everything, but on some of the things, we will be, I believe, pretty well-positioned.
If I may add versus others, where we still have to work is the cost side.
Mm.
Both the fixed cost
Mm.
The content of the car, if I may say. The big, big difference, in my view, is the lineup.
Yeah.
Today, you know, all the big lineup offensive is coming. I think we can be very proud of what we do without that lineup.
Mm.
When you look at others, their lineup is different. Without naming anybody, but you see what I mean. Again, the arrival of Mégane E-Tech and the arrival of Austral and everything which is in the pipeline is what is gonna make the difference in the future versus others.
To make it simpler, you know, we do 25% of C-segment cars, okay? Competitor do 50. Okay?
That's it, yeah.
Yeah, 50. In a C-segment car, more or less, you earn twice, between 2 x and 3 x what you earn in a small car. Make the math.
Mm.
You will see what will be the effect of that.
My takeaway is that we're gonna add potentially 500,000-600,000 units of volume at 2-3 x the average profit. Is that?
That's a very basic calculation.
I'm really sorry, guys, but this is now the end of this session. Luca
Oh, really?
The floor is yours for the conclusion.
No, I just want to thank you all here and the one connected for taking the time. It was a pretty long session, but I hope it was interesting for you. I hope that we were able a little bit to explain in depth what's going on in this house. It's a bit magic, you know, and we're very. Let's say, I'm personally very proud of being, having the chance to, you know, to participate to this challenge of bringing back an historical OEM back on track, and it will continue. We are prudent. We don't, you know, want to overpromise things. We know this is a very uncertain environment. We're getting more and more confident that everybody knows the benefit of Renaulution, that in this house, everybody knows what we have to do.
That's already a good starting point.
Yeah.
Thank you very much.
Thank you.