Renault's stock plunges 18%: What's behind the drop?

BarcelonaStock market earthquake for Renault. The French car manufacturer suffered a drop of almost 18% on the stock market this Wednesday after announcing a worsening of its economic forecasts for 2025, both on a commercial level – with fewer vehicle sales than expected – and on an accounting level – with a lower operating margin for the year as a whole, indicating,

This decline in the French manufacturer's stock market performance, which has reduced the share price from €41.3 to €33.9, comes amid a context of weakness in the sector in Europe. The automotive industry in Italy is experiencing the worst crisis in the last 70 years, with a 70% drop in production for the Stellantis group, and in Germany, the economic contraction that the country has suffered has affected the largest car manufacturer on the continent, the Volkswagen Group. The multinational decided last year to close factories in its home country and this week closed another one in Nanjing, China.

So Renault is the French face of a crisis caused by low demand in Europe –especially electric cars– and the strong entry of Asian competitors. This scenario led to the tightening of the European Union's tariff policy towards China, something that has also ended up impacting European brand cars manufactured in the Asian giant. Furthermore, the automotive sector is one of the hardest hit by the tariff war launched by the United States, which has imposed a 25% tariff on vehicles imported from other countries since April.

Specifically, the French automotive group saw its operating margin reach 6% of revenue at the end of the first half of the year, and free cash flow reached €47 million, impacted by a negative change in working capital of approximately €900 million. From January to June, sales reached €27.6 billion in the first six months of the year, a 2.5% increase compared to the same period last year.

The company attributes the result to a lower-than-expected performance in June, with below-expected revenue volumes and increased sales pressure in a declining market, particularly in the light commercial vehicle segment in Europe. Renault attributes the increase in inventory to 530,000 vehicles at the end of June to the slowdown in sales in the last month of the first half of the year.

To address this situation, Renault Group has strengthened its cost-cutting plan, focusing on reducing overhead, production, and R&D costs, and maintains its commitment to creating value over sales volume. The company emphasizes the solidity of its foundations, with a "competitive" vehicle range, a European order book equivalent to two months of sales, and a high level of factory utilization of close to 90%.

New interim general manager

The Renault Group's board of directors on Tuesday appointed current CFO Duncan Minto as its new interim CEO until a new CEO is appointed following the resignation of Luca de Meo as the company's chief executive last month. In recent years, Minto has held various positions in the group's finance department. In 2022, he was appointed CFO of Dacia, and a year later CFO of Alpine.

Meanwhile, Renault has confirmed that the selection process for the new CEO is "well advanced" and assures that the new appointment could be officially announced soon.