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Groupe Renault to steer markets like Latin America, India and Korea towards high margin business: Global CEO Luca De Meo

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Mumbai: Even as the French car maker Renault India is planning to intensify its presence in the mainstream mass market with a sub-compact SUV named Kiger, the parent has announced a new mid-term plan that shifts focus from ‘volume to value.’

Presenting the new strategic plan coined ‘Renaulution’ through a webcast, Luca de Meo, global CEO of Groupe Renault said his intention is to make all of its key global markets around the world profitable by 2023. India is likely be a key part of this plan as it had already broken into top 10 markets for the French car maker in 2019.

De Meo said that Renault will steer group’s international footprint towards high margin business: notably in Latin America, India and Korea while leveraging its competitiveness in Spain, Morocco, Romania, Turkey and creating more synergies with Russia. It will look at re-inventing the business model in China and may target market entry in line with the 6G roll out in the future.

The aim is to defocus from entry or mass market models globally, said the CEO, but didn’t clarify a specific plan for pre-dominant mass market like India. On Brazilian market, Demeo said Renault will attempt to push the price higher.

“We grew bigger but not better, we grew wider but not better. The idea is to move from share of market to share of wallet. Now we know what we have to do – reduce our breakeven point, reduce complexities and focus our investment on profitable growth. We will focus away from market share to margin growth,” explained De Meo.

While the mid-term plan was largely centered around its core market Europe, refering to the emerging markets, De Meo said the emerging markets will go back to pre-covid level by 2023 an it will take another two years – i.e. till 2025 for Europe to attain the pre-covid sales. And the mid-term plans are defined keeping these market recoveries in mind.

This would essentially mean, the core focus of India too may shift from CMF-A platform cars – which is the entry car Kwid platform vehicles priced sub-Rs 8 lakh (Kwid, Triber, Kiger) to a higher margin CMF-B platform – which may come out with new generation Duster and C segment SUV. The approval for the CMF-B platform for India is yet to be received, however given the global shift, it appears to be the next logical step from Renault in India may be towards bigger SUVs and MPVs that deliver higher margins.

Interestingly, Renault’s global alliance partners Nissan have shifted focus to B and C segment. In Indian market parlance – vehicle between 4-4.75 metre priced between Rs 10 lakh to 25 lakh.

The strategic plan is structured in 3 phases – Resurrection”, running up to 2023, where the company will focus on margin and cash generation recovery, ‘Renovation’ spanning up to 2025, which will see renewed and enriched line-ups, feeding brand’s profitability and lastly ‘Revolution’ mode from 2025 and onwards, which will pivot the business model to tech, energy and mobility; with an intention of making Groupe Renault a frontrunner in the value chain of new mobility.

Renault will be launching 24 new models in the coming five years including 10 all electric vehicles.

Renault is consolidating its vehicles and powertrain architecture. Going ahead it expects the three vehicle architectures – CMF-B, CMF-C and CMF-EV to account for 6 million units global sales for the Renault-Nissan Mitsubishi alliance. It expects 85% of its total sales to come from three architectures. The company is reducing the powertrain option from eight to four.

The e-Tech hybrid powertrain will be ready by 2021, full fledged electric vehicle powertrain by 2023 and the hydrogen fuel cell by 2025

It expects 45% of the brands sales to come from C and D segment in Europe by 2025, which will add to the bottomline.

The CEO expects the EV to deliver higher contribution margin from EVs over conventional powertrain and he sees the cost of EV powertrains dropping by half in the coming 10 years.

Renault will also seek to right-size is manufacturing footprint and the CEO is targeting 100% capacity utilisation at its factories by 2023.

There is a plan to reduce diversity by 30% in production; the future product plans are defined to have 85% of parts to be common. With commonalities of vehicle and engine architecture along with plant rationalisation, the company intends to deliver 3% Group operating margin by 2023.

Renault expects in the coming decade, 30% of its total sales to come from fully electric vehicles with 35% of them with hybrid powertrain.

Groupe Renault will be spending 14 billion Euros in the coming years and the R&D spend as a percentage of turnover will come down from 11% currently to 8-9% in the coming years.

The Group has set a new financial objective: By 2023, the Group targets to reach more than 3% group operating margin, about €3bn of cumulative automotive operational free cash flow (2021-23) and lower investments (R&D and capex) to about 8% of revenues.

By 2025, the Group aims for at least 5% group operating margin, about €6bn of cumulative automotive operational free cash flow (2021-25), and a ROCE improvement by at least 15 points compared to 2019.


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Auto Sector news: Auto sector is going through a long-term structural slowdown, says industry body SIAM

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NEW DELHI: Automobile industry in India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicle segments has witnessed a decline over the last three decades, as per industry body SIAM. The auto industry has been facing headwinds even before the COVID-19 pandemic derailed the entire sector last year, a research conducted by the Society of Indian Automobile Manufacturers (SIAM) has revealed.

The study clearly shows that the pandemic is not the only reason for the auto sector slowdown, which is facing deeper structural issues that need attention, the industry body noted.

According to the research, which focused on industry growth rates till March 2020, compounded annual growth rates of all segments, including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers have witnessed a continuous drop over the last three decades.

CAGR of the domestic passenger vehicle industry stood at 12.6 per cent between 1989-90 and 1999-2000. It, however, dropped to 10.3 per cent between 1999-2000 and 2009-10 decade, the research data showed.

The growth rate further dropped to 3.6 per cent in the last decade.

The research further pointed out that contraction in the domestic passenger vehicle segment has been much steeper in the last five years.

From a CAGR of 12.9 per cent between 2004-05 and 2009-10, it came down to 5.9 per cent in the 2009-10 to 2014-15 period.

However, in the last five-year period, between 2014-15 and 2019-20, the CAGR of the passenger vehicle segment has dropped to just 1.3 per cent.

“The numbers show a clear long-term structural slowdown in the Indian automobile market across segments even before COVID pandemic began,” SIAM Director General Rajesh Menon noted when contacted over the matter.

For instance, the passenger vehicle market’s 10-year CAGR over the decade FY2000 to FY2010 stood at 10.3 per cent which dipped to 3.6 per cent in the decade FY2010 to FY2020, he added.

In the two-wheeler segment, the CAGR has dropped from 9.8 per cent in 1999-2000 to 2009-10 period, to 6.4 per cent in 2009-10 to 2019-20, data showed.

Similarly, the research showed a drastic drop in annual growth rate in the commercial vehicle segment. From a CAGR of 12.7 per cent in 1999-2000 to FY 2009-10, it has come down to just 3 per cent in the last decade.

Further, three-wheeler sales have dropped from a CAGR of 9.8 per cent in the 1999-2000 to 2009-10 period, to just 3.8 per cent in the last ten years.

As per the FY20 statistics, passenger vehicle sales at 27.7 lakh units were the lowest in four years, SIAM data revealed.

Similarly, commercial vehicle sales at 7.2 lakh units were the lowest in three years, two-wheeler sales at 1.74 crore units were the lowest in three years and three-wheeler sales were at lowest in two years at 6.4 lakh units.


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From autos to agriculture, top executives hail sustainable tech

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From the invention of the wheel to the advent of the steam train and development of smartphones, humans have been creating new technologies for thousands of years.

Our hunger for innovation has transformed society and turbocharged economies. Now, as concerns about the environment mount, new ideas and innovations could have a big role to play when it comes to creating a more sustainable planet.     

At a recent panel discussion moderated by CNBC’s Steve Sedgwick, ex-Unilever CEO Paul Polman touched upon the subject, referring to the Paris Agreement on climate change in the process.

“One of the reasons we’re moderately optimistic that we can achieve the one and a half (degrees Celsius) … warming target and be net zero by 2050 is obviously technology,” he said. “And this is where the private sector comes in.”

The automotive industry is one area where technology and concerns about the environment have driven change in recent years.

Today, major players such as Daimler, Nissan and Volkswagen are ramping up their electric vehicle offerings in a bid to compete with Elon Musk’s Tesla.

At the political level, a number of governments around the world have pledged to ban the sale of new diesel and gasoline vehicles by the end of the decade.

During the discussion Polman, who’s the co-founder and chair of the social venture Imagine, went on to highlight the pace of change taking place.

“We thought the tipping points for electric vehicles would also be 2050 — we now think that the tipping point is 2024,” he said.

“We’re very close to obsoleting the combustion engine,” he added. “Many countries (are) already making agreements to go out of the combustion engine by 2030, 2035, and most of the major car companies have done the same thing.”

Food production is another industry where digital innovations and technologies are helping businesses find value and conduct operations in smart, sustainable ways.

Last year Polman’s former company, Unilever, announced it would partner with Google Cloud to “use satellite photos to help monitor the ecosystems connected to our raw materials.” The collaboration would initially focus on palm oil, Unilever said.   

“Thanks to technology … like Google Earth, we’re now able to match, (to) … the square meter, concessions that are given to … palm oil plantations with deforestation or with fires,” Polman explained.

Armed with this kind of knowledge, firms are able remove such plantations from their value chain, he added. “That’s a verification or a compliance measure, that is enormous.”

Changing attitudes, hope for the future

It’s clear that technology has an important role to play when it comes to meeting ambitious goals connected to the environment.

But ideas about sustainability rely heavily on financial backing and on major companies — as well as their shareholders — having the will to take steps to alter how things are run. 

In recent years, ideas around ESG — which stands for environmental, social and corporate governance — have started to gain traction at some of the world’s biggest companies.

Earlier on in the panel Jan du Plessis, the chairman of British telecommunications company BT, articulated how much things have changed.

“I have been — either as an executive or as a chairman — dealing with public equity investors in the City of London for more than 30 years,” he said.

“Now, 30 years ago, the idea that they might ask you, when you do these investor visits, about climate change and ESG, it would have been unthinkable,” he added. 

“Twenty years ago, it would not have happened, 10 years ago, they started talking about it but frankly … you could you sense they feel, ‘well, it’s something I should ask about,’ but actually, they’re not interested in the answer.”

“Even five years ago, when they gave more airtime to asking about ESG and climate … you knew full well, they’re going through the motions. That has changed, big time, in the space of 12 to 18 months.”

Du Plessis went on to state he was “extremely optimistic” about what was now going on.

“The end investors, the end providers of wealth, young people, wealthy people, pension funds, are insisting that their fund managers invest in companies with credibility in the climate space,” he said.

“And so the fund managers — surprise, surprise — are hammering companies on their climate agenda.”


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Hero Electric to convert Shree Maruti Courier’s fleet across 5 cities to electric scooters

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Electric two-wheeler maker, Hero Electric on Thursday said it has partnered with Ahmedabad-based Shree Maruti Courier Services Pvt Ltd to convert the latter’s fleet across five cities to electric scooters.

The partnership is part of a pilot project by the logistics firm across Ahmedabad, New Delhi, Mumbai, Pune, and Chennai and is aimed at initiating a novel concept of creating a green energy supply chain, the company said in a statement.

Shree Maruti Courier Services plans to expand this service to 20 cities and add more than 500 E-bikes in future.

“It has been our endeavor to partner with more and more businesses to convert their fleets into electric two-wheelers. We are happy to have partnered with Shree Maruti Couriers, who are among the largest in our country to create this green corridor with our bikes,” Hero Electric CEO Sohinder Gill said.

Stating that Hero Electric’s new Nyx-HX series is flexible, modular and versatile to answer most of the needs of customers, he said the company will be able to offer longer mileage ranging from 82km per charge to an 210km per charge to address the last mile deliveries.

Shree Maruti Courier Services Pvt Ltd Managing Director Ajay Mokariya said the company has launched a pilot project in the five cities in India and the response for the same has been very encouraging.

“The courier and logistics industry are very price sensitive and fuel cost is an essential element in our business. With the E-bike adoption, we would be able to reduce the fuel cost significantly, contribute to reducing carbon footprints, and provide competitive services compared to the traditional delivery tools,” he added.

Mokariya further said, “this model seems more sustainable and cost-efficient for us and we are planning to roll-out the same in multiple cities in a coming time.”

Shree Maruti Courier Services has a nationwide network of over 2,650 outlets and round the clock working at 89 regional offices across India. It handles around 2.5 lakh courier and consignments a day through air and surface transport routes.


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