Renault has no plans to follow Tesla (TSLA) into price war
Renault made it clear that the company has no plans to drastically cut prices on their electric vehicles and follow U.S. rival Tesla in what the French carmaker's finance chief on Thursday called a downward "spiral".
Tesla (NASDAQ: TSLA) posted its 1Q earnings results Wednesday after the closing bell, with EPS coming in at $0.85, $0.01 worse than analyst estimates. The company also posted its lowest quarterly gross margin in two years after slashing prices aggressively in markets including the United States, China, and Europe to spur demand and fend off rising competition.
Tesla shares were down 6.6% in U.S. pre-market trade and fell 7% in Germany on Thursday, weighing on the sector and pushing Renault stock down by a similar amount amid fears of a looming price war.
Renault CEO Fabrice Cambolive said earlier this week the brand would be reviewing prices worldwide, calling Tesla's price cuts a warning and a challenge to the whole industry. However, finance chief Thierry Pieton said Renault did not need to follow Tesla's move.
"There is no big incentive to go and cut the prices...and go in a spiral that some of our competition is following," he told analysts. "If it results in the short term in slightly lower volumes, so be it."
Some analysts believe that Renault may have to cave in on the pricing front, which would impact margins.
"Renault may be forced to lower its prices and find new efficiencies via its new manufacturing plants in northern France," said Orwa Mohamad at Third Bridge.
Renault ranked as the third EV brand for sales in Europe behind Tesla and Volkswagen last year.
The carmaker’s first-quarter revenues grew 30% in the first quarter to 11.5 billion euros, above market expectations, thanks to a rebound in sales. The group posted a 14.1% increase in sales over the period to 535,000 units.
Renault was hit hard by the COVID crisis and is in the middle of a turnaround. The company is betting on premium cars and electric vehicles to boost profits. It is renegotiating a long-standing alliance with Japan's Nissan and plans to list its EV unit later this year.
It is also ramping up the launch of new models to spur growth. It plans to launch an SUV version of its Espace minivan and a restyling of its best seller Clio city car this year, and 12 new models in 2024.
Shares of TSLA are down 8.99% in mid-day trading on Thursday.
By Michael Elkins | [email protected]