Times may be tough at Renault, but as James Baggott discovered, the French giant’s restructuring plans mean that a spectacular fightback is on the way…
Registrations are down some 57 per cent on 2008, and the brand’s posting monthly sales figures that look far worse.
In May, it was the third worst performing marque with sales down 64 per cent, behind only Hummer and Chrysler.
But, sat chatting to the confident UK managing director Roland Bouchara and his commercial operations director Len Curran, you wouldn’t guess it.
These are two guys with a plan – one that’s been two years in the making – and they say the figures only tell half the story.
‘In the first quarter of this year we decided not to follow the other manufacturers with their huge discounting,’ explained Bouchara, in his thick French accent. ‘Availability has hurt us – this is a big part of why market share has been lower than expected – but we are confident in our business plan.
‘Our dealers are happy. They are making good profit on the cars they sell – and this is important. And the scrappage scheme will really start to benefit us from September.’
We’re sat in the boardroom of Renault’s head office in Rickmansworth, Hertfordshire. Based alongside its ‘alliance’ partner Nissan, Renault’s modern offices are within spitting distance of a snarled-up M25.
It’s a few days since May’s sales figures have been issued by the SMMT, and I was half expecting the meeting to be called off – but it’s testament to the confidence these directors have in their ideas that they’re willing to take the time to explain them.
‘Two years ago we launched a plan called Renault 20 with the key aim for us to work very closely with our dealer network,’ says Bouchara. ‘Usually manufacturers make all manner of demands so this time we said, “Ok, let’s get together and come up with some working rules and work out how we can reduce your distribution costs”.
‘The objective was to achieve, by 2010, a cost reduction for dealers of an average £148,000 per year – as of April we are there on that figure. Dealers are now financially better off.
‘And I would say we are probably one of the manufacturers showing the best profit levels for our network – at a time when most of our rival networks are showing a loss.
‘How are we doing this? Well, that is down to the strategy we started two years ago. Yes, this has not been exactly understood by everyone – but it is through this that we have lost market share.’
LOSS MAKING CHANNELS
Bouchara explains he made a conscious decision to cut loss-making channels from the business. Daily rental and Motability have both been axed, resulting in those sales figures that make such grim reading.
‘We lost market share because we wanted to stop being a non-profitable business first for Renault and then dealers,’ says the UK chief. ‘We have reduced our sales on non-profitable business like Motability, which are not only non-profitable for Renault, but all manufacturers.
‘Our strategy has instead been focussed on improving our image, our customer service problems, making sure our products are attractive and addressing running costs.
‘After that it is quite easy to claw back our market share. I could, if I wanted to, instantly add 1,000 vehicles mechanically to our sales. But we have decided not to do this.
‘With Motability we are at one or two per cent – we should be at six. But tomorrow, if I wanted to lever up the gear, we could add 1,000 vehicles to our figures.
‘Some manufacturers decided to be in all avenues like this – but we did not: it is a choice. If the financial situation and the pound are looking better in the future – we will be back, but for now we have decided it is not for us.
‘At the end of the day, if I come back on daily rental, a fleet deal or Motability then we will be fine – it could quickly change, and that’s quite important to remember.’
The plans Bouchara speaks of have had their drawbacks though – most notably the huge cut in dealer numbers across the UK from 260 to just 200 by the end of the year.
Commercial operations director Curran, who has worked his way up to board level from various dealer-facing roles across the UK, explained the cull wasn’t without emotion.
‘In some cases we have had to issue a number of termination notices in order to get to our target number,’ he explains.
‘In many cases it was by mutual consent. In some areas it was easy where there was a nucleus of dealers in a geographical area that could be taken care of by the one outlet; in some cases it made commercial sense to do it.
‘The ones that were more difficult were the ones where you had to make a decision. We used a scorecard system which showed us which dealers were best suited to manage that territory. These were difficult and there was a bit of emotion in these cuts but it wasn’t just about cutting the size of the network – it was about having the right dealers, in the right locations, with the right management.’
Every Renault retailer in the UK now knows how it fits into the manufacturer’s plans with a few currently working out their notice periods. But that’s not to say there aren’t any open points – Curran confirms they are actively seeking retailers in several areas.
‘We have half a dozen open points in the UK and are in the process of filling them. But we are selective of who we take because we’ve got a model that is profitable and robust. It gives us much more flexibility in who we talk to and who we draw into the franchise.
‘They must have the right level of facility, right level of financial funding and a robust structure, but being alongside another franchise does not frighten us – we have a strong proposition and we’ll take anyone on from that point of view.’
The marque has some exciting plans too. Not only are there a host of new model launches planned – giving Renault one of the youngest model ranges on offer – but it’s also making huge strides in green technologies.
At the forefront of the manufacturer’s plans are electric vehicles and at this year’s Frankfurt Motor Show we’ll see the direction the maker, alongside alliance partner Nissan, is taking.
The marque’s press spokesman Tim Jackson – who was also sat in on our chat – confirmed that Renault plans to have a range of electric vehicles that appeal to 30 per cent of the buying public as early as 2012.
‘The biggest challenge facing the car industry is to manage the transition to the electric vehicle,’ said Bouchara. ‘We cannot continue to manage the world as it is and we believe the electric vehicle – the zero emissions car – is the best solution for the industry. Renault-Nissan want to be launching a car of this type by 2012.
‘We are well in advance of other manufacturers here and there is no reason we cannot be the leader. But the market has to manage this transition. What will be the job of the dealer? We are already speaking with our network on this; we are speaking with the government too – we have to, because electric vehicles will mean we have to rethink the way we do things now.
‘In the next 10 to 15 years – which isn’t that long really – electric vehicles will be a major part of the market.’
The real problem is convincing people that EVs are a viable alternative to conventionally-fuelled cars – short ranges and hassle refuelling will put off many buyers. But Renault has a clever solution to this.
The Renault EVs – which will have a range of 150km – feature an on-board computer system that will divert the car to a battery station when it needs more juice. You’ll simply drive into these car-wash style booths and a computer will slot a new battery in place.
The whole process is designed to take four minutes – quicker than filling your car up with petrol. Obviously this would mean a sea-change across the country and an industry wide standard battery embraced by all marques, not just the Renault-Nissan alliance.
‘We’re working with all manufacturers to try and convince them this is the best way to go because plugging the car in at home is not the way to do it,’ added Jackson.
There are certainly big things ahead for the manufacturer, but what about the here and now? What message would Bouchara give to his dealer network?
‘Have hope in terms of the market share increase and faith in what we’ve done,’ he says.
‘And be confident in our ability to come back.
‘It has been tough in the last two years as we started a strategy that was not easy. In November 2007 we said to our network we wanted to be one of the most profitable franchises within the generalist marques. Today we are – we are – I’m not speaking fiction here, we really are. We did it; we got the results.’
‘We’ve got the best range now in terms of strength and depth. We’re selling good cars, at a good price – but most importantly with an exceptional level of profit per unit. We’ve all been where the Koreans are now – buying volume for the sake of volume – but as they say: volume is vanity, profit is sanity.’
Bouchara adds: ‘All we need to do now is to increase our volume and come back on the channels we left for profitable reasons. But if the market conditions are getting better – and they are – then we are in a better position. Dealers have to keep the faith – we will be back.’