Renault Expansion Targets New Growth Markets

French carmaker Renault is looking to offset its domestic struggles by focussing on growth markets outside of Europe, which BMI believes has so far served the carmaker well. It has announced it will expand the capacity of its plant, shared with Japanese partner Nissan Motor, in Tangiers, Morocco, as it looks to Africa for new growth opportunities.

The Tangiers plant has only been open since February, but already Renault plans to more than double its capacity to produce the budget models of its Dacia subsidiary. Sales of the Romanian brand grew 2.5% year-on-year (y-o-y) in H112, compared with a 2.4% decline for the Renault brand, mostly on the back of its success in emerging markets. Renault's group sales in Morocco rose 22.4% in H1 to claim a 37.6% share of the market, while sales in Algeria, where the company signed a Memorandum of Understanding in May to build a plant, were up 50.5% y-o-y for a 28% market share.

It is for this reason, as well as expectations for the wider Africa region to offer growth potential, that Renault will have the largest production facility on the continent when the expansion is complete. Renault's senior vice president for the Euromed-Africa region, Jean-Christophe Kugler, said Africa could develop along similar lines to Latin America from the next decade.

Blueprint For Growth
Car Density In Morocco, Mexico And Brazil

BMI's own forecasts show the passenger car density in Morocco topping the 100 cars per 1,000 people mark by 2013, and reaching 130 by 2016. Brazil was a the 130 cars per 1,000 people mark in 2003, suggesting that a gap of around a decade or slightly more between the development of the two markets is a reasonable assumption.

The Tangiers plant's production will not be restricted to the growing domestic market, however, as Renault plans to export most output. The existing assembly line, which has an annual production capacity of 1700,000 units will be expanded, and a second line will be added to begin in 2013. When complete the plant will have a total annual capacity of 400,000 units.

BMI has previously noted that shifting its strategic focus, and targeting high growth markets outside of Europe will be necessary for Renault to achieve financial stability over the longer term ( see our online service, June 28 2012, ' Renault To Decrease European Reliance '). Indeed, its net income of EUR786mn (US$964mn) in the first half of 2012, down from EUR1.3bn (US$1.6bn) in H111, should be seen in contrast to national rival PSA Peugeot Citroen , which posted H112 net losses of EUR819mn (US$990mn) ( see ' PSA First Half Losses Set To Continue ', July 25). BMI believes that Renault will continue to outperform PSA, due to its more profitable organisational structure and stronger presence in high-growth emerging markets.

This article is tagged to:
Sector: Autos
Geography: Morocco, Morocco, Morocco, Morocco

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