And in replay versions on our website. The presentation file, press release and activity pack for these calls are all available on our website in the finance section. I would like to point out the disclaimer on Slide 2 of this pack regarding the information contained within this document and in particular about forward looking statements. I invite all participants to read this. Today's call is scheduled to last about 1 hour and 15 minutes.
Our CEO, Luca Demeo, will share with you his main takeaways from the first half of the year and his assessment of the group situation after 2 months at the head of the company. Then, Petit Debose, our Deputy CEO and CFO will take you through the presentation of H1 results. To conclude, we will have a Q and A session with Luca and Clotilde that will be joined by Denis Lovot, EVP, CEO, Dacia and Lada Brands Fabrice Combolyve, SVP, Renault Brands, Sales and Operations and Thierry Pieton, SVP, Deputy CFO, Group Controller. This time, the Q and A session will be conducted through Teams. Therefore, you will have to raise your hand And if you want to ask
a question and open your mic when I hand over to you. Without further ado, I will hand over to Luca. So good morning, everybody. Welcome. Very pleased to be here today with you.
In a moment, Clotilde, as Thierry Anticipate will share the details of our financial results, but I'll take the opportunity to say a few words to comment on our H1 On performance and also maybe a quick review of my first year in the position. That has been a pretty intense mark Many changes and but also some progress. I think we can share with you better news than in the recent past, the first message is that the Renault Solution plan is working and you will see it on the results And it's actually already starting to pay off. So some of the Highlights in terms of numbers. The group revenues are up 25% 27% compared to the First half of twenty twenty and reached €23,400,000,000 Very important is that the auto business operating margin is back in the black.
So we're making money on Our core business again, very good performance of RCI and out of us that have continued to improve compared To the last semesters and I know that this is a key issue for you, the free cash flow from automotive It's almost at breakeven and even positive before restructuring expenses. That means that our operation has paid For our investments and our intention is, of course, to keep it that way from now on, we see the possibility. So liquidity situation continues to be very solid. And liquidity now represent more than 30% Of 2021 estimated turnover, so way beyond the minimum threshold That is expected. So let me explain how we did it.
First of all, the pricing strategy, so the All go to market strategy and probably Fabrice, and then you will be able to comment and add information on what I'm saying. But In a nutshell, we improved our net pricing position by 8.7 points on H1 2020. And this, I think, is a pretty remarkable thing. And in Q2, in fact, we have achieved Plus 11.5 points. So I haven't seen many of these swings in my career in the last decades.
So we gave ourselves the target internally. We probably also communicate about that, that we would try to position the Renault brand at the level of the best Competitors, namely Peugeot. And if you check-in the public information, you will see that we were already able to achieve a similar price Position, which was one of our objectives. We have cut also our cash Fixed cost, I think faster and deeper than initially planned. And we are on track to hit our The target which was set for end of 2022, basically 1 year earlier, Okay.
So we think that we're going to achieve the €2,000,000,000 fixed cost reduction by the end of 2021. In the semester, we reached more than €600,000,000 So if you sum up To the €1,200,000,000 that we cut last year, it makes a little bit more than €1,800,000,000 Reduction versus 2019. Just to give you some example Our radical was the work on fixed cost. I will mention The optimization we did on the engineering side, we have been cutting parts diversity, so So diversity on life cycle products by 20%, 25%. And we are planning to Cut 35 percent of diversity on the what we call the revolution cards that will come from now to 2025.
We have also reduced our breakeven point faster than announced. If you probably remember, we promised a minus 30% in reduction of breakeven point by 2023. We already achieved 25. So that gives us a motivation to go further in the next year months. So we promised to minus 30, 20, 23.
We already did 25 until now. Of course, everybody know that all these results were achieved in a Pretty challenging environment, still penalized by pandemic, chip shortage and other issues. Because following the let's say, the COVID crisis demand in our perimeter, that means main market where the main market is Europe is still More than 20% below 2019. And we estimate that we have lost at least 200,000 units in terms Production in H1 because of the cheap shortage. But from my perspective, what is more important is that I can see after 12 months here that we as a team, we have really changed the mindset and approach.
So I can really feel that the new paradigm value over volume is now shared across the organization down to the Plants around the world to the markets. We have, for example, reduced fundamentally our Commercial diversity to boost our sales mix. In fact, in many of the volume products, we have reduced our commercial diversity By 40%. And that has also allowed us to improve the mix. I will give you some example, the new Products that we have launched, the Arkana in Europe or the Kiger in India, They are reaching 85% of high end version, which is pretty unprecedented in Renault, but also cars that were already in the market And our best seller, like for example, the Captur shows a 71% mix Of high end version.
So it means that we have reduced diversity to actually boost The value that we're proposing to the customers and the customers are buying. We also improved the channel mix In H1 for the Renault brand, the weight of our retail sales have increased by 2 points compared to H1 2019. And just as an example, Sandero is again the best selling passenger car in Europe when you look at, Let's say, the retail channel, and I think this is it's kind of an indication of the approach that we are having. We also keep our leading position in Europe in what we call green sales. So we are on a double digit mix with the Pure EV cars with ZOE, with the Twingo EV and with the Dutch Spring.
And in fact, as you probably remember, The Etech hybrid technology hybrid and plug in hybrid was launched in September, October of last year. But in fact, what happens is that we were able to replace basically diesel with hybrids. That's in a nutshell what happened. So already 1 out of 4 of our products, It's a hybrid. So you have cars like the Arkana where the mix is already 40%.
And that will allow us, we think, to, let's say, achieve the CAFE targets this year. So, so far, we are in line with our plan. And so we confirm that we are pretty confident that by the end of the year we will hit our objective. So I also think that the speed of execution is nothing to compare with what it was a few years ago, at least this is what The people that have been here for some times are telling me. Just as an example, we used to have one executive committee per month.
We do it every week. I'm a design teams and engineering team every week in the techno center. And the result of that is that we were able To green light 9 products in 9 months, which is something we would have done in a few years or so. We have been very, very quick in processing on the product planning. So all the projects that We had announced on the 14th January are on track in terms of timing, in terms of cost, in terms of, let's say, content.
So and I also believe that I knew that, but the last 6 months have been a confirmation that the new brand organization Gives us more focus, more orientation to result, more orientation to the market and to the customers. So I think the organization is more reactive and agile than ever. So this is the Revolution effect. That said, we think we still have a lot to do to close the gap with our best competitors. We are absolutely aware of that.
We are working on it. And I think that you will see starting from next year that the new wave of products, Especially the reconquest of the C segment will help us to step up from the current performance. We have planned to present the Megane Electric in Munich. I believe that this is It's a leading product that shows all the competence of Renault when it comes to electric vehicles. I'm very confident This will be considered one of the benchmark in an important segment where we said we wanted to, Let's say, go to increase, let's say, the average transaction price of Renault, which was one of the strategic challenges that we I think that the first step has been reached with this first half results with an operating margin that It's basically closed to what we had promised for the end of 2023.
So we are something like 2.5 years in advance to our commitments. I also think that the worst is behind us, but you will see we remain prudent and I think We must still fight on many aspects, including cost. We know that the recovery will take some time. It's a typical Issue in the automotive industry. We now have to maintain this performance in H2 despite some of the headwinds that we'll have to fight, Like, as everybody know, lasting cheap shortage and raw material inflation, I'm sure that Clotilde will I'll come back to that.
But besides the risk, we have also some opportunity as the demand might We think might recover, provided the of course, that the pandemic is under control. As soon as We will have better volume. We will clearly be able to leverage the work done on our breakeven point. That will be a very important swing effect. And of course, we will continue to work to improve our business mix by keeping our Discipline.
So the all everything that we have achieved so far in terms of price, in terms of mix, in terms of commercial post, we have absolutely no Attention to go back. So before leaving the floor to Clotilde, let me also I'll share with you our guidance for the year. We expect the European market and the Eurasian market to be up 10% And Latin America demand up 15% for the full year. And in this context and Considering the risk on the production of about 200,000 units at the end of the year as a cumulative, we target For an operating margin for the full year in I would say more or less in line with the first half, which as I said before, was the commitment we gave for the end of 2023. So I will now hand over to Clotilde.
Thank you for your attention.
Yes. Thank you. Thank you, Luca, and good morning, everyone. As Luca told you, the group's financial results for the first half of twenty 21 show a marked improvement over last year. It is true that we have been in a very different environment compared to the first half of 2020, which was very specific because of the lockdowns in Europe.
But this does not mean the environment has been very supportive as demand has continued to be disturbed by restriction related to the pandemic around the world and the production has been disrupted by the chip shortage. In light of this, as our CEO just told you, these results underline the significant progress we have achieved to restore our financials and show the effectiveness of the Renolution strategy. While we recall we still have a lot to do, these results mark a milestone in our turnaround. Luca has just shared the guidance for the full year. This guidance must be read in the context of rising prices of raw materials and uncertainties regarding demand and ships availability.
About the ship shortage, we told you at the beginning of the year that we were seeing a risk For production loss of about 100,000 units in the full year after higher losses in H1, But thanks to some recovery in H2, especially during the usual summer break. Unfortunately, the recovery Looks now quite unlikely as on top of the initial lack of production capacity, we are now impacted by the COVID development in Southeast Asia where some production are located. While risk visibility remains weak, our best estimation now is the loss of production of about 200,000 units for the year. Now let's look in detail at these numbers and share the main explanations. Let me start with a brief summary of our commercial figures as released on July 16.
In the first half, Renault Group Sold 1,420 units in an increase I. E. An increase of 18.7%. In Europe, volumes were up 14.3% in a market much more dynamic. But as you know, in the frame of our strategic plan resolution, We have changed our commercial paradigm and favored the quality of our business.
This led us to give up some market share. When you add the impact of the ship shortage, you have the explanation for this performance. I also would like to stress that the market recovery in H1 has been weaker than expected at the beginning of the year and volume remained more than 20% below 2019 level as Luca already told you. Outside of Europe, the situation has been a bit the same, but we enjoyed a stronger growth than in Europe except in Asia Pacific where we have suffered in South Korea from a strong aggressivity from domestic players. Actually in the market where we are playing, Demand has been down 13% versus 2019.
By brand, Renault was in line with the group performance while Dacia and Lada Did better and ASM worse. It is worth noting the strong performance of the LCV business that reports an increase of 44% year over year. On slide 13, we show the full P and L for the group. Starting With the top line, group revenue reached €23,400,000,000 an increase of 26.8%, but on a very depressed comparison. As in H1 2020, our revenues were down 34%.
The next line shows positive group's operating margin at 2.8%. The net profit is back in the black at €368,000,000 after the losses booked last year. This improvement came partly from our own But also from Nissan's return to net profit after the Aviso losses reported in 2020. On the next slide, we show the revenue contribution by activity. Group revenue after flat Q1 grew 61% In Q2 from an exceptionally depressed level in 2020, automotive excluding AVTOVAZ contributed For €20,300,000,000 in H1, meaning an increase of almost 29%.
While impressive, this increase was not yet enough To get back to 2019 revenues level, AVTOVAZ achieved a 36% revenue increase and contributed for €1,500,000,000 This performance has been supported by a buoyant Russian market, a good level of pricing and this despite an adverse currency trend. Revenues from our captive sales financing RCI Banque were down 5% at €1,500,000,000 reflecting lower dealer activities in the context of curfew and strict inventory management. I will now review the breakdown of revenues for the automotive activity excluding AVTOVAZ on the slide 15, please note that we have changed slightly our presentation to split the external items from the internal one. The first item currency has been negative by 3.9 points. The usual culprits explain this impact Argentinian peso, Brazilian real, Turkish lira and Russian ruble.
The second bucket is the market impact on our volume development. As the comparison basis was easy, We have a strong positive of €3,700,000,000 The next one, the group's performance in terms of volume development has had a negative impact of €1,400,000,000 This is the consequence of our strict commercial discipline, which has led us to give up some poor businesses and the ship shortage, which has prevented us to fully leverage the success of some of our models. The regional mix has been a negative of 2.2 points. This illustrates the strong growth we enjoyed in countries with prices below group's average like India and Russia, But also the lower sales in South Korea where the average price of our cars is higher than the group average. The product mix is 2.9 points coming from the good start of our new C crossover Arkana, the continuing stream demand for LCVs and lower sales of some model with lower than group's average price.
Price impact is the brightest spot with a contribution positive by 8.5 Points for the first half and 11.5 points for the sole Q2. As Luca mentioned, this is the fruit of the new commercial policy of Renalution. It shows how serious we are about restoring the pricing of our cars, the quality of our business and protecting our residual values. Sales to partners contributed positively for 2 points in H1. This is above all due to a weak comparison basis.
The last bucket, others contributed positively for 6.8 points. This unusual high impact is coming from different contributors. Due to the partial lockdown of our network in H1 2020, the spare parts and used car businesses base of comparison were at a very low level. In addition, we had a destocking impact from our wholly owned dealers and the impact of the buyback retreatment. I will now turn from the Automotive revenues to group operating margin by operating sectors.
The Automotive segment excluding AVTOVAZ was almost breakeven At minus €41,000,000 versus a loss of €1,600,000,000 in H1 2020. AVTOVAZ operating margin has been positive €118,000,000 to compare with a loss of €2,000,000 last year. Globally, the auto activity posted A positive operating margin of €77,000,000 showing an improvement of €1,700,000,000 over the previous year. Mobility Services reporting an operating loss of €16,000,000 Our financing activity, RCI, delivered €593,000,000 contribution to the group margin versus €469,000,000 last year and I will comment more in detail this 4 months later in the presentation. On the next slide number 17, we provide you explanation on the group operating margin variance.
H1 Group operating margin is positive at €654,000,000 This is a €1,900,000,000 improvement versus last year. As for the revenues, we have changed the way of presenting and we are now not using the monozukuri anymore as we have regrouped the cost under our control including G and A in the productivity bucket. In more detail, First with the external factors. Currency weighted for €70,000,000 reflecting the negative impact of the Russian ruble and the Argentinian peso, But also the positive from the Brazilian real and the Turkish lira, thanks to our export production base in these two countries. Raw material impacted negatively for only €76,000,000 this half, but we already know that it will be much more negative In H2, as there is always a time lag effect between the spot price and the impact on our P and L.
Then comes the volume impact from the market, which is a positive €642,000,000 reflecting the volume recovery on last year's depressed level. We have isolated the volume impact not related to the market development, but to our performance But to our own performance and sales to partners, it is a negative €155,000,000 This does not come as a surprise and came from our commercial policy that has led to some market share renouncement. The mix price enrichment impact It's positive by €599,000,000 and shows the benefit of this new policy and pricing discipline in Europe and overseas. Productivity gain contributes for €219,000,000 and I will give you more detail about them in just a minute. As already seen, AVTOVAZ and RCI have increased their contribution by £120,000,000 £124,000,000 respectively.
To finish this part, let's give a look at the last bucket named others. It contributes positively for €454,000,000 And as usual, is made of many different things. The major contributors are parts and dealers activity that has been almost idle in H1 2020 and the impact of the retreatment of sales with buyback commitment. In the bucket name productivity, We show again of £143,000,000 coming from the purchasing performance and material optimization. Warranty costs have increased by €58,000,000 notably because of the low activity during the lockdown and as we have decided to support our dealers for being more flexible regarding some warranty deadlines.
R and D showed a gain of €87,000,000 in the P and L, while the Expenditure have been reduced by more than €200,000,000 The gap is explained by the parts capitalized. Although The capitalization ratio decreased from 48.6 points in H1 2020 to 42.7 points this half. Manufacturing and logistics contributed for €37,000,000 in spite of the chips disruption and the change in amortization and capitalization ratio Weighted for €63,000,000 of euros or 0.3 points of revenues. Finally, G and A Gave half cut by €63,000,000 reflecting our strict cost commitment. Regarding RCI.
RCI generated €8,700,000,000 of new financing in the first half versus €7,700,000,000 in H1 'twenty. Average performing assets decreased by €2,600,000,000 reflecting the lagging effect of the collapse of the business in H1 2020. Moreover, while the financing to retail customer was progressing lightly in H1 2021, financing to dealers Decreased materially notably reflecting the new inventory policy. The net banking income receded slightly as a consequence of Change in the regional mix. The cost of risk decreased from 0.99% to 0.16% And these sharp improvements stem from much better business conditions, lower wholesale volume and some non recurring provision reversal.
Therefore, one should not expect the cost of risk to stay at this low level for the full year. Operating expenses, While under strict control increased 6 basis points because of lower average performing assets. And as a result of the above, RCI operating Profit contribution increased €124,000,000 and reached €593,000,000 for the first half back to 2019 level. Now that we have covered the operating variance, I will continue down the P and L with the other operating income and expenses items. They amount to minus €83,000,000 versus minus €804,000,000 a year ago.
Several items explain this improvement. Restructuring costs and provision decreased by from 166,000,000 to €145,000,000 impairment returned to a more usual level impacting for minus €43,000,000 after the exceptional minus €445,000,000 booked last year. Disposal of some real estate assets It led to a capital gain of €128,000,000 when we had a loss of €153,000,000 last year. Continuing down the P and L, the next item is the net financial income and expenses. These results improved from minus €214,000,000 to minus €163,000,000 It came partly from a positive catch up effect on the debt value Following the decision to reimburse in H2 €1,000,000,000 of the loan benefiting from the French state Guarantee.
The next slide shows the impact of associated companies in Renault's P and L. Nissan's contribution to our first half It's positive €100,000,000 when it was a negative €4,800,000,000 for the first half last year. Contribution from other associates Has turned positive to €6,000,000 compared to minus €70,000,000 last year due notably to the negative result of our Chinese JVs in H12020. I will now turn back to the P and L where the next tax charge for the first half came to €200,000,000 versus €273,000,000 last year. While our taxable base increased, I remind you that last year amount Included a charge of €268,000,000 coming from AVTOVAZ deferred tax asset reassessment.
Bottom line, net profit After tax came in at €368,000,000 versus a loss of nearly €7,400,000,000 last year. Now that I have completed the analysis of the P and L, I will turn to slide 24 on the evolution of the net debt. Cash flow from operation excluding AVTOVAZ and restructuring expenses amounted to 1,804,000,000 versus €22,000,000 a year ago, reflecting the operating performance improvement. Net tangible and intangible investment came to €1,500,000,000 in the first half, down €1,000,000,000 versus last year level. CapEx at €800,000,000 were down nearly 0 point €6,000,000,000 Capitalized R and D decreased by €481,000,000 from €658,000,000 Following our strict investment policies, while financing the development of all the cars embedded in the renovation plan.
These vehicles represent an investment of €198,000,000 versus €464,000,000 a year ago. And it is worth noting that our investments are covered by our cash flow from operations. Change in the working capital requirement Had a negative impact of €400,000,000 due to the low level of payable considering the EC crisis and despite a strict management of our inventories. AVTOVAZ contributed positively €294,000,000 to the free cash flow and restructuring costs led cash out of €302,000,000 in line with the 2 to 2022 targets. In total, the group operational free cash flow Was negative by €70,000,000 I remind you that it was a negative of €760,000,000 in H1 2019.
After taking into account the proceed of the Daimler's share disposal and some ForEx and IFRS impact, our net automotive financial position Has improved by €800,000,000 and stood at minus €2,700,000,000 And the group liquidity situation was €16,700,000,000 at the end of June. On the last slide, we show the inventory situation in euro balance sheet And for the independent dealer network, as you can see on the slide, inventories decreased significantly partly because of the chip shortage. At the end of the period, we have shipped cars to our independent dealers as the level was not adequate for covering needs during the summer break. And now the total inventory represent about 62 days of business. This completes my review For the first half of twenty twenty one, and I turn back to Luca.
Okay. Very good. Thanks, Corteel. So I know that besides the analysts, there are many employees that are connected today. So I'd like to take this opportunity to thank our teams For the remarkable work job was done.
And of course, to encourage them To do even better on the months to come because at least we've shown that this is possible To turn around this company as we wanted and as we planned. I am pretty confident for the future. I think that Renault Group is moving Into action and alongside all the employees, the management team is united in its effort and entirely dedicated to the turnaround. So now with Clotilde, with Denis, Fabrice and Thierry, we, of course, will be very happy to answer to all your questions.
Thank you, Luca. So we will start the Q and A session. I remind you that since we are using TIM this time, You need to raise your hand. And when I will hand it to you, you will have to open your mind. Your digital hand.
So we're going to take the first question from Thomas Besson. Thomas, open your mic, please.
Thank you, Thierry. I hope you can hear me. I have 3 questions please, Relatively simple, all of them. The first one is on CapEx. You spent substantially less than I think we had all modeled.
Can you give us an indication of either the absolute or the percentage amount of CapEx we should expect for the year? Should we Like for the margin, double the €1,500,000,000 you spent? That's the first question. The second, pricing was very impressive in Q2. We are getting to I think the anniversary of the first initiative that the new management team took.
Is it possible to anticipate a pricing that remains above 5% in the second half or should we I do believe that it's going to be more in the low single digit given that you already had, I think, 6% in H2 last year. And third question, on RCI Bank, is there today any visibility on the possibility for Citibank to pay a dividend to the automotive business and could that dividend be around €1,000,000,000 Among that, we had been talking about in the past when we saw the potential reserves could be distributed by RCI. That's for me. Thank you.
So on CapEx, our current internal View is around €1,700,000,000 for the year. Clearly, we are targeting to be less than €4,000,000,000 for R and D and CapEx for the year. And again, I reiterate Because we achieved that through reduction of diversity, more discipline in what we develop, but we do not touch And actually, we're progressing very well on all the renovation plan in terms of cars. So it's really disciplined. We are able now to do cars with less a single car with a lot less R and D and CapEx than what we call entry ticket Within the company.
So we're not ending the lineup. It's more discipline and that's a great work which is being done by Gilles Le Bon. Luca, you want to add?
Yes, I just wanted to give you a figure. I think compared to the previous generation of cars, We were able, thanks to the job the work of Gilles and the engineering team, to reduce by 40% the average entry ticket. So this is pretty massive. It's almost half of what we used to do before. To do cars, in my opinion, are even better.
On the pricing thing, Thomas.
Sorry, Luca. Yes. Sorry, Luca. I think there may have been a technical issue. Maybe it was on my side again, I didn't hear the beginning of Clotilde's answer.
So did you answer Clotilde the Yes, I hear you.
No, I said it's we're targeting something for CapEx around 1,700,000,000 For the full year?
For H2?
Yes, for the no, for the full yes. Okay. CapEx And R and D and CapEx for the full year is something lower than €4,000,000,000
Okay. Thank you.
And Thomas, did you hear my answer?
Yes, I did. Thank you, Ricca. Okay.
So I'm going to make a second comment on the pricing thing. I think that, Of course, we have seen a pretty impressive dynamic on the pricing. We have no intention to go back. That's for sure. I think probably we will probably experience a kind of inflationary context.
So we'll be following What competition does? The other thing that you have to take into account that there is still room for us To improve the net pricing position, basically, I would say for two reasons. 1 is The product that we have been launching, for example, the Arcanas, the Cangoos, the Etech technology, etcetera, These are all, let's say, product that will probably push our mix up. We have changed, I would say completely the go to market and the remuneration policies of our dealer network, Turning them from volume to turnover and to margins. And of course, you need some time for this thing To kick in, so I am pretty positive that we will be that this thing is structural.
It's a base also for the future, And we will continue like this, yes, maybe not exactly on the same dynamic because that thing has been. But this is not a one off. This is a base for the future. It's what we wanted to do.
And on RCI, obviously, the good news has been last week when the Central Bank European Central Bank announced that they will lift The ban, so we now need to go back to them because they are changing some of the requirement in terms of a capital ratio Requirements, but we're still targeting to try to get what we had announced. But I can confirm today, I hope we're going to be able to confirm before the Q3 announcement.
Okay. Thank you. So we thank you, Thomas. We're going to take the next question from George Gautier from Goldman Sachs. George?
Yes. Thank you for taking my questions. The first question I have is, Luca, you've been at Renault for more than 12 months now. And if we look at Renault, there is clearly a very valuable asset in the Nissan holding, which if realized in part could provide you with the cash to not only have a best in class balance sheet, But also to enact your vision for Renault faster, can I ask, have you as CEO inquired as to whether there might be an to reduce the Nissan stake when Nissan share price is at an appropriate level? Is it something you would be interested in?
And what would actually be the process in terms of requisite approvals to take action here? Then the second question I had was with respect to the dealer And also the aftersales, would you describe the 1H level as normal? Was there actually Some catch up in the after sales as restrictions lifted and or were dealer profits actually higher than normal due to the tightness in the Supply chain? Or do you think there is actually sequentially further opportunities for that side of the business in the second half and also as we go into 2022?
So I think on the Nissan, I think you're going a bit too far. I think the issue for us right now is And that's this is what we said also a few months ago was to turn the work with the Alliance Partner into some key operational issues. I think we're doing a very good job together. We've made some decisions that show that The alliance is working as a benefit from an operational point of view. Think about the deal we had with Mitsubishi for Europe or The decision we made on battery also battery supply and on battery commercialization.
So that's the kind of work we're doing. I'm very happy with that. It also gives me the chance, your question, to congratulate Our colleagues from Nissan and Mitsubishi for the good job they have done. So we are in a completely different environment, I think, And relation that we used to have, I would say, a few months ago. On the aftersea, I would Consider maybe Denis or Fabrice can comment, but I would consider the activity of, let's say, relatively normal.
So there's not been any Anticipation of strange things. So we will continue in this direction.
Yes. For the after sales, actually, just remember last There was a pandemic and the COVID and people didn't drive their car and the workshop were closed for months during the first half. So here we are more back to normal. So there is No exceptional factor in this one.
Great. Thank you very much.
Thank you, George. So I will turn now to Jose Azumendi. Jose, it's Florez, you're also open your mic, please.
Thanks very much. This is Jose, JPMorgan. Congrats, Luca Clujil, on the progress done so far. We're We're starting to see the results. A couple of questions, please.
Luca, can you take us through products that you have discontinued, Products that you're launching, step 2. And then 3, the opportunity you see in product mix. I don't know how you define it, but maybe share of crossroads in SUVs in your business that you can think you can increase In the next 12 months, I'll be very interested in hearing about that. And then second, Clotilde, can you talk a little bit about Restructuring cash outflows and provisioning, maybe first half 'twenty one and then how much are you expecting For the full year, how much have you provisioned so far? What kind of restructuring cash outflow should we expect for the second half of the year?
Thank you.
Hola, Jose. Look, I try to make it simple because, of course, there are a lot of products, but of products. But One of the things you have to keep in mind is that we are achieving these results on a low cycle on a low product cycle, Okay. So where most of our mix is done by basically small cars, okay? So we are entering with 2022.
We kind of started with the Arkana, etcetera, but we're entering 2022, the phase 2022, 2023, 2024, The phase where we will be putting like a lot of products on the C segment, which was a segment where historically Renault was performing. And in the last cycle, we were not there where we should have been, okay? So you will see the Megane coming in the 1st semester of 2022. Basically, the car will be kind of replacing The ZOE on a completely different cost structure because it's a new generation product with different batteries and more competitive and of course, with the Higher, let's say, potential in terms of pricing because it's a C segment car, okay? And then later you will see in the 2nd semester, you See the successor of the Qajar, which was a product that was not successful, was not competitive, where we had So issues of pricing, of residual value and simply competitiveness, okay?
So we're entering a different cycle, Yes. What we have discontinued is, if I would say, within the range. That means we've cleaned up All and Fabrice can comment on that, but we've cleaned up versions that were not working. We have discontinued Products or versions or engines in markets where we were not making the right margin. So we did kind of a dirty work And very detailed work around the globe to make sure that the profitability was protected.
And of course, When we saw products, think about some CD product that were not successful, We didn't necessarily, let's say, push these cars just for the sake of doing the volumes. So that's what we have done. We haven't stopped fundamentally anything. But the good news is that We're entering now in a different phase from a product life cycle.
I will turn over to Thierry, our Deputy CFO, on the restructuring question. Sure. Thanks, Clotilde. So from our
Sure. Thanks, Clotilde. So from an income statement perspective, the second half should be roughly in line with what you saw in the first half, the €44,000,000 From a cash standpoint, first of all, we're completely in line with the plan that was set out in 2022 cost reduction program. So if you remember last year, we had cashed out about €330,000,000 in total, which was in line with the Objective we had of about 30% in the 1st year. This 1st semester, the 302,000,000 gets us to about 50%, So still in line with what we had set ourselves as a pace.
I think what you should see in H2 is slightly higher than the first half.
Thank you so much.
Thank you, Thierry. Thank you, Jose. So next question from Charles Cullicotte From Redburn, sorry. Charles, floor is yours. Open your mic, please.
Hi. Thanks for taking my questions. Firstly, I wanted to ask about market share loss in Europe, Which I think was about 1.5 percentage points so far this year. Obviously, an element of that is The inevitable consequence of the fact you've raised prices and switched channel mix, but I guess an element is also related to the chip shortage. So do you expect to recover some or all of that market share in Europe later this year or next year?
And then my second question, I just wanted to ask about electric vehicles and get an update there, maybe on the order book for the Dacia Spring. And also on the ZOE, I think you've done 33,000 units this year. Are you still confident of reaching 100,000 by the end of the year? And given the comment just now, when the Magani comes out, are you going to stop selling the ZOE or you Continue to run that for a few more years.
Okay. Fabrice, for the market share?
Yes. Regarding market share in Europe, we are with the Renault brand at 7% this year PC and LCV and 5.8% just only PC. What is important for me to say is that, 1st of all, 7%, we are the 3rd brand. It means we have awareness, visibility and we have to make choices. We did some choices in terms of channel mix.
But more than that, I think this market share is robust based Because it's based on, I would say, 3 pillars. First of all, we are very strong, of course, on LCV with a growing demand. 2nd point, we are betting on all what is electrified with a very, very strong growth and we are Better than the market. And third point, now we are coming back on the C segment. I would say that there is no objective to gain, to regain and so on, But more an objective to be robust on this 7% base and to make money on that.
Regarding ZOE, Everybody, of course, is speaking about a drop of volumes, but ZOE is still the 2nd EV in Europe We have a 6.6% share of market. And of course, the idea is with the new Megane To complete our offer, by the way, which is already completed on the A segment with Twingo, which is growing this year and which is enabling us to be a brand with a leading position in Europe in
Let's say, what you also have to take into account, Charles, is that When someone goes into Renault, a Dutch dealer, 1 year ago, you would find 1 car. Now you find the ZOE, you find the Twingo, you find the Spring and also you find the hybrids and plug in hybrids. So we were anticipating the ZOE to go slightly down. So it's no big concern for us. And we will continue with that car that is pretty successful, as Fabrice said, until 2024.
And then this thing will be replaced by So we will certainly have a very strong position in the B segment EV also In the years to come. And on the other bank from for that?
Yes. For the spring, actually, the first spring to be released To private client will be in September, but we already posted 15,800 firm orders by client, which is a great success actually The quantity of preorders that we had at the early stage of launches have been transformed into firm orders And the cars will hit the road in September for private client.
Thank you, Denis. So next question Thank you, Charles. Next question will be from Philippe Houchois. Philippe?
Good morning. I trust you are hearing me. My first point, Thank you very much for a clean set of numbers. It hasn't always been clean. And I think right now, we've got a clear understanding.
And the only wish I had is you would stop partly disclosing after that without giving us the details. That would be nice to have going forward. The questions otherwise I have is 2. The first one is on battery, maybe more for Luca. You've made a very clear commitment to the alliance with Nissan.
And at the same time, in the past few months, we've heard you talk about building a battery plant that will start 8 gigawatt hour then go to 20. And Nissan, there's something similar, just a few 100 kilometers north. I know there's no channel in between. And but it seems to me that battery investment was a perfect example of showing The investment community that this alliance is working, are you actually pulling investment? And you didn't.
And I was just kind of curious by why that is? Is it because Just still diverging. Is it because Brexit? It seems to me that there was a missed opportunity to show the alliance is alive and well and committed. So any comment on that would be appreciated, Luca.
The other question I have more is on RCI. Strong performance continues, No doubt. There used to be a gap where RCI had much better return on assets than most of the peers and I feel that gap has closed. We also haven't seen those big releases of provision that we see elsewhere in the industry. Maybe it's because it happened within the reporting period instead of no quarterly developments.
But I'm just curious about is RCI returns now about as good as it gets? Or is there more upside From here or recreate that gap they used to have against the versus the competition? Thank you.
I think on the battery on the supply of the battery and the example you mentioned, I see different. I think what you have to look at is the fact that we'll be producing the same module, that's what we decided, With the same supplier, which by the way is a supplier that has participated 20% by Nissan. So we made a decision in the direction of choosing a partner, which is already part of the family. And You also have to consider that it is very important in general that the battery plant is, let's say, integrated and close To the assembly plant. So Nissan, I'm not going to comment on Nissan strategy, but I can assume or imagine that They had to localize, let's say, an electric car.
So they had to put the battery production close to the Plan for logistic cost and taxation, etcetera, etcetera. And the same we did, Okay. So the fact that we have the same battle, we decided together to have the same module, To have the same supplier. And you shouldn't underestimate the potential connection that we will be able to develop together on the 2 projects, Okay. Maybe to share some of the investments of the things that we do on one side or on the other Side of the channel.
I'm sure that we will in a few months years, we will be able to show you that these projects Are kind of aligned and coordinated.
Thanks.
On the rest. First on VAS, yes, one day, we will have That's embedded in the rest, which means you won't see even you will see even less. But just one explanation on the good performance of VAS, Very good performance on volume first, thanks to the market, but also the performance of the company. Very good performance on pricing And despite raw material increase and FX increase. And so at the end of the day, it's a very good performance from after that.
I mean, almost 8% in terms of margin. RCI, I like your questions. On the return on capital, well, remember just one thing. We have not been able to pay any dividend Since 18 months except for the small €69,000,000 that we paid in the first half. Return on equity is dependent on the equity.
If the equity is a lot higher than what it should be because you cannot pay dividend by nature then you go from 16% to 14%. In this first half, we went to 14% last year to 14.7%. So we improved despite the fact that there is a lack of volume. You talked about release of provision like other banks we did, which is the reason why the cost of risk went down from 0 0.99 to 0.16. So we did release a lot of provision too.
And is there a lot of potential still? Yes, obviously, Because the result that you see here, which is at the level of 2 years ago, despite the fact that average performing assets are lower, New financing are lower because of the market and because of the new retail not retail, wholesales Stock reduction. So in my view and there's still a lot of potential. RCI being quite tangled with Mobilize. We're looking at many, many things In order to improve the business, continue to grow and I guess you may have noticed that we have bought out a startup this week In the subscription business, which has a very huge potential in order to go along with the new Usage model, I would say, which is not to necessarily buy a car, but to subscribe a car and to subscribe services.
So we will tell you more about RCI and Mobilize probably later in the year or very beginning of next year, and you will see that there is quite a lot of potential.
Thank you, both.
Thank you, Philippe. We're going to take the next question from Kai Mueller from Barclays. Kai, the floor is yours.
Thank you very much for taking my question. And yes, very impressive results. Maybe first question for you, Luka. You just mentioned your margin at H1, 2.8 percent is very close to your target for the end of 2023. In light of that and your guidance also for a similar level for the full year, are you reconsidering what you've guided the market And if so, is there something in the making that you're looking at a Capital Markets Day where you might be wanting to update us where you're heading to?
The second point is your price increases have been pretty impressive, especially in the Q2. Can you give us a little bit of sense Of how much of that is the market and how much of that is you? And on the portion that is you, Can you have or can you give us a sense of how much of that causes you a drop in volume, I. E, because you're pricing certain customers potentially out of your Products? And then the third point third question was really on this others line.
A very strong number there. You mentioned the aftermarket and buyback agreements. I know you said sort of for the second half of the year. Can you just outline also what you think this contribution will be going into 2022 and 2023? And if you ever think about breaking this out given the significant level it's been contributing recently.
We
have we actually anticipated the first question we made, And we came to an agreement with the team that when it comes to future guidance, we'd rather wait, Let's say, the result of H2 to see if we can reconsider the thing. I think the most important is that We're delivering a little bit in advance or even in advance of what we were anticipating and what we promised. But I remember that when we made a presentation of resolution on the 14th of For January, some of you guys were a little bit like, I would say, disappointed that probably the level The target we're giving ourselves was relatively prudent. We always say that we would consider that As a floor. And of course, the team is very engaged to bring back as quick as possible Renault To a level, let's say, comparable with the best competitors.
When I see how the machine is running, I think At least I feel that we can get there, okay? And this is already the good news. So let us Fix H2, get to the level that we promised you. And that's the focus right now, and then we will talk about announcements. On the pricing, Ayanna, you can
No, no,
no, no, no, no, no,
I mean, on the pricing, I probably need the help of Denis or you on that because it's a pretty complex issue, The story of the pricing. One of the things that allowed us to really I think we did better than the market. That's for sure. I don't know exactly the numbers or maybe some but one of the biggest effect was the work that we've done on the mix of the cars Because we really went very much into the detail on cleaning up the thing, allocating the products in the right market. It's no sexy work.
It's just like dirty kitchen work that we did, and we did that in an extreme way. And the fact that we clearly decided to get out of some channels. And that has a huge because between a Short term rental and retail customer, there is a huge difference right now. So we clearly decided to avoid these kind of things. And we'll continue to do that because there's we have to let's say, we have To engage in a completely different approach, now everybody is convinced.
I think also the dealers, they start to see the benefit of it. One of the things that makes me also confident that this is a structural thing on the pricing is that we see residual value, Let's say, increasing faster than for the other competitors, okay? So So getting back to level of residual value in most of the products that are at the top level in the market. And in fact, the residual value is the real price of a car. So and there is always some kind of inertia in these things, but it's going really in the right
page. Yes. To add on pricing, don't forget one thing. We also have the ability Pass on the FX in the emerging countries. So what we described is globally for the world, but remember, we have had A quite a big impact on pricing again this half.
This is being passed through. Usually, we say 2 third. So you can make your math on that. The rest is exactly what Luca mentioned, discipline in channel mix, discipline in pricing, To compensate pricing the enrichment, which we still have, the new technology, everything that we put in And also some anticipation of the raw material increase. So all that is it.
Defining exactly what is linked to the market share loss It's extremely difficult. So we don't look at that really in this detail. On the other box, so you have many things, as we said already. We have in this box, you usually have parts and accessory, our own dealer network, buyback adjustment. If I look at the first two ones, H1 last year was very low, as we already mentioned.
The dealers were closed For I don't know how many weeks. So you have a base of comparison, which is exceptionally favorable to that business. It's not completely fully back to where it could be though because you still had some curfew and things like that in the first half of twenty twenty. Buyback adjustment really depends on our strategy on buyback. We're decreasing our strategy on buyback.
So in the future, it may be different. We also had Some positive negative one off last year with the political closure I would say of Algeria, which had a negative impact. So you have a positive one off In what you see here today. So what to expect? I would say a slight negative in H2 because you won't have the same comparison base.
And for 2022, 2023, we still have some levers on after sales that we want to improve, improving also the profitability of the dealer network And the rest is going to be depending on buybacks. So I would say slightly negative on H2 because of the very different comparison base And 2022, 2023, it's very difficult to level that. So I don't think we're going to split it in the future because it should not be That big in the future, usually it's a few 100, it's not that big of a number.
Okay. Thank you, Clotilde. Next question from Tom Narayan. Tom?
Yes. Tom Noreen, RBC. Thanks for taking the question. So a follow-up on the pricing question. Given the market strength there, one of the fears investors are having is, was there demand pull forward into H1 from H2 Higher priced vehicles, curious if you're noticing that.
And then I totally understand the desire to move up The food chain on value over volume, but you have some entrenched competitors already there, especially in Europe, Is what gives you confidence you can gain market share? And then Clotilde, can you give us an update on charging trends with your VEVs? Is it still happening more in the suburbs? Or now are you seeing more in the cities? And are Tesla's comments about opening up their charging network Other OEMs in Europe, something you take seriously as a benefit for your EV efforts.
Thanks.
On the pricing, do you do we think just for the team, I'm not sure they got the question, is there was there some Pull forward from H2 to H1 globally on the market, I don't think so. I'm looking at my colleague here.
Pull forward on the pricing?
No, not of the volume first And then that helped the pricing, no?
No, no, I wouldn't say that. Move forward, not at all because we are lacking cars globally with a difficult supply. I'm talking the market here. And we are suffering from the raw materials. So the pricing, I would say, is completely natural and will slightly continue, as Luca already said.
On your market share question, in fact, We talk less and less about market share, to be honest. We talk about what makes money, okay? So I think that, As I mentioned before, we are now into some kind of low order product cycle. We are important cash Kicking in, like, for example, the dust is important for us, it's coming after summer. The Cango is now on the thing.
It's making volume. The Arcana is proving to be very successful. And from next year, we will start attacking the C segment. So we are building, let's say, a solid base. And the product offer dynamic will do the rest to get us Potentially to bigger market share because on the C segment, we are clearly underperforming.
So the only way is up for us on that. But again, even on the C segment, we'll try to do a quality job and focus on the things That make money.
On the charging station, I guess you referred to the comments that we made on the e ways. Basically, what we know today is that People are charging their cars 80% either at home or at work. And you're right, there is a lack of charging station elsewhere, Meaning on the street, in the highways, etcetera, etcetera. So we know that there is a lot of initiatives in The area of building new infrastructure by many, many, I mean, parties, Be it energy company, be it other OEMs, you mentioned Tesla, but it's not the only one, be it infrastructure company, be it the authorities. Obviously, it's something which is crucial for us also.
So we're also looking on how to Help this movement about developing charging infrastructure, but it's too early to talk in detail about our plans here. But we're watching that very carefully and discussing with many people because I think energy people want to have Make sure that the volume of the OEMs are going to be there. We want to make sure that the infrastructure is going to be there on where our customers need it, I. On the highways, in the cities, everywhere. So there's a lot of discussion and you hear announcement regularly about partnership between 1 or the other.
And we're also looking at what we need to do in that area.
I think that the fact that Tesla is opening to Other cars can only be seen as a positive because it adds, let's say, charging capacity to the system. So why not? I think the whole issue of infrastructure will be a teamwork between OEMs and other industries, So the and authorities. So everybody understands that we need to accelerate On the infrastructure side, because the automotive industry is doing the job in Proposing more and more electric vehicles. So it is clear that we're putting a lot of pressure and having
a lot of conversation with other
people to make sure that, With other people to make sure that the infrastructure keep the pace On that, as Krotil said, 80% of the people are charging at home or the office. So the focus there is to kind of de bureaucratize the process. The other side being, let's say, the supercharging capacity On the main access highways and let's say big national roads. So I think this will be probably the focus in the next months from everybody.
And I forgot to mention, we're already active in this area. We have a Sidore called mobilized power solution, pretty active, very efficient, which was currently only working with on the B2C, so helping B2B. B2B, B2B only working closely with cities, With corporates, with dealerships in terms of installing charging station and we're present in 11 countries in Europe now. And we're now developing the B2C business, helping customers to go beyond this anxiety of charging at home. So we're already present in this segment.
So we're going to take the last question from Henning Cosman from HSBC. Henning? So apparently, it's no longer there. So
Sorry, Thierry, can you hear me now?
Yes, yes. I could hear you, yes.
Sorry, I was clicking and clicking and I didn't unmute. I just have one clarification left. I think Luka, in his prepared remarks, talked about 200,000 units production lost already in H1. So I just wanted to double check If that was accurate, that implies that you expect to be back on budget for H2 because it's, of course, the same as the shortfall that you expect for the full year. And just a clarification on the trajectory of the guidance for 2021.
I know you said, of Previously, that H2 would be better than H1. So I just wanted you to please discuss the dynamic of that. If you see it in such a way that there was a certain pull forward of effects that you would have previously expected to come more in H2 True than H1, such as pricing or also maybe the phasing of savings? Or is it rather that External conditions have deteriorated, such as much higher raw material than anticipated and So just a shift in the sequence of the semi shortages. So if you could just discuss the trajectory Within the 2 semesters of the 2021 guidance.
Thank you very much.
No, I'm going to ask to you On the production losses, I said we lost a little bit more than 200,000 H1. So and for the full year, we With the current level of visibility, which is not perfect, we think we'll be able to At the end of the year to get to 200,000 losses, it means Q3 will be and we are in the middle of the thing. So We know that's going to be pretty tough in terms of cheap supply, but we see a possibility in Q4 to actually get That's the anticipation. Now as I said, there are so many uncertainties. That's why we tend to be relatively Prudent on the numbers.
The good news is that despite the fact that we lost more than what we were Anticipating at the beginning on H1, despite that, we were able to secure a decent result. And so we will try to do the same no matter what happens in H2.
Yes. And to add to what Luca just said, you're right, usually H2 is better than H1. The two conditions which make us a little more prudent than announcing anything more than H1 is that 1st, as Luca mentioned, the EC crisis is not over. We do foresee, as Luca just said, a weak Q3 because Of that, Q3 is usually weak, right, because it's summer closed and here on top of it, you have the EC and a recovering in Q4. And also don't forget raw material.
If you listen to what all the other OEMs have said, they have increased their risk on raw material. As I said, the impact on H1 was relatively low due to the I'm lagged between the spike in the spot price and when it flows to the P and L. Are we going to hit hard In H2, we estimate that the impact of raw material in H2 is going to be €500,000,000 €600,000,000 if not more, Which well, versus EUR 7,000,000 in the first half or EUR 76,000,000. Thank you. But so that's the two reasons which make us a little cautious on H2 versus the usual H2.
As I said, we anticipated that. We have Started to increase the prices, etcetera, etcetera. So these increased prices are going to flow in the second half. But those are the two elements which make us a little Prudent on H2. But nevertheless, committed to be at least around what we said for we did for H1 and the full year.
Henning, I think just to tell you a little bit about the fighting spirit at Trondahl, we were able to negotiate Many plants to keep the plants open in August, okay, just to keep producing. Normally, they will be closed. So it tells you the level of determination and flexibility and commitment of the people around the world at Renault To make sure that we can show you something that is semester after semester can improve and go in the direction that we want.
Okay. Thank you very much, Clotilde, for the magnitude of the raw materials, and well done on the results. Thank you.
So conscious of the time, I think we have to stop the Q and A now. So thank you for being with us this morning. And of course, the IR