Renault has lashed out at Tesla for cutting the prices of its electric cars, warning that the US group will “kill” the second-hand value of cars and send itself into a “spiral.”
The French automaker’s finance chief Thierry Pieton’s comments come hours after Elon Musk vowed to keep cutting prices to boost sales.
Renault shares rallied on Thursday after analysts cited concerns over price pressure across the industry despite higher first-quarter earnings, arguing the French automaker won’t cut its price tag. down 7% despite
Renault said its main aim is to keep customers’ monthly lease payments as low as possible, which is necessary to protect the “residual value” of the car.
Most new cars are purchased in a financial transaction where the driver finances the depreciation of the car during the lease term rather than the overall value.
The more value the car is expected to lose over three years, the higher the monthly payments are usually. About 80% of the French automaker’s EVs are sold in finance.
“If you cut the price too much, the residual value will suffer,” says Piéton.
“There is no great incentive to cut prices, eliminate residue, and go into the spiral that some of our competitors have done,” he said. “If it yields results in the short term with slightly less, so be it.”
Pieton’s comments are aimed directly at Tesla, which has slashed prices by up to a fifth since the beginning of the year, creating fears of a price war across the industry.
The decline in Renault’s share price comes despite recent recovery efforts after sharp losses from the coronavirus pandemic.
French car makers have lower margins than many of their peers and are often seen as a “weak link” in the industry, according to Jefferies analyst Philippe Houchois. “The market is worried about prices going down after Tesla,” said Houchova.
On Thursday, Renault posted first-quarter revenue of 11.5 billion euros, up 30% year-on-year, slightly above analyst expectations, and improving operating margin from 5.6% to at least 6% in 2023 maintained the goal. last year.
Despite the French automaker’s comments, some analysts say the group will need to revisit prices to remain competitive and find savings elsewhere to keep expanding margins. said it might.
“Renault may be forced to cut prices and find new efficiencies through a new manufacturing plant in northern France,” said Olwa Mohammad, an analyst at Third Bridge.
Renault’s comments came hours after Elon Musk suggested on Wednesday night that Tesla would continue to lower prices in pursuit of its goal of increasing market share.
The electric car maker has set an unofficial target of selling 20 million cars a year by 2030, more than industry leaders Toyota and Volkswagen combined.
“This is a great opportunity to extend our lead further and we will continue to invest in growth as quickly as possible,” Musk told investors.
The Financial Times reported last month that the residual value of Tesla’s vehicles has fallen significantly since it began cutting prices earlier this year.