Renault will avoid Tesla price-cut 'spiral' on EVs
Renault will hold the line on Megane E-Tech prices, CFO Thierry Pieton said, even as Tesla lowers prices and gains volume.
Renault could offer more attractive leasing and financing terms for the Megane E-Tech, shown, but will not reduce prices.
PARIS -- Renault said it would not follow Tesla’s price cuts for its electric vehicles such as the Megane E-Tech, saying it could afford to sacrifice some volume to maintain pricing levels.
Tesla has cut prices on its midsize Model 3 and Model Y this year up to 30 percent in some markets. That has helped put the Model Y on track to be the best-selling model in Europe in the first quarter by a large margin.
“Our intent is not to cut the price” on the Megane, Renault CFO Thierry Pieton told investors on Thursday in Renault's first quarter results call. Earlier this week, Renault brand boss Fabrice Cambolive said Tesla’s cuts would force the group to take a close look at its pricing policy worldwide.
"We will analyze country by country, market by market, which level of competitiveness we need to have to stay in the match," Cambolive said.
Pieton on Thursday said Renault could address pricing on the Megane by offering more attractive leasing and financing terms, and adding incentives such as free charging wall boxes “to make the deal a little sweeter.”
“When you cut prices significantly, residual values take a dip,” he said. “We haven’t made any drastic price changes and we don’t plan to do so.”
He added that the Megane was very profitable from a margin perspective, with 80 percent of buyers opting for a larger electric motor, and more than 60 percent taking the highest trim level. In addition, 80 percent of retail buyers financed the car through Renault.
“There’s no big incentive to cut prices and kill residuals, and go into a spiral,” he said. “If it results in slightly lower volume, so be it.”
“We run the business on maximization of value, not maximalization of market share,” Pieton said.
The Tesla Model Y, a midsize crossover, starts at 44,990 euros in France, with the Model 3 midsize sedan at 41,990 for the base model.
Potential EV price war
The Megane E-Tech, a compact full-electric hatchback, starts at about 42,000 euros in France, with top-line versions close to 50,000 euros. The Tesla Model Y, a midsize crossover, and the Model 3 sedan sibling model start at 44,990 and 41,990 euros in France, respectively -- an amount that is under France's maximum EV incentive threshold.
Tesla CEO Elon Musk has said the EV maker would focus on bringing prices down to drive demand, and that strategy has led to cumulative price cuts of up to 30 percent in some markets.
Other automakers have weighed whether to follow suit, with Ford cutting prices on its Mustang Mach-E in the U.S., but Volkswagen saying in February it would hold the line on EV pricing.
Pieton said Renault could afford to hold the line on EV prices, even if it meant lower volumes, because it was generating high margins across its range. Buyers continued to opt for higher trim levels and more-expensive hybrid powertrains, and the automaker focused on retail sales over less-profitable channels, he said.
Among the highlights, Pieton said that 67 percent of Austral buyers chose full-hybrid powertrains and 61 percent high-trim versions. For the Dacia Jogger compact crossover, 25 percent of buyers have chosen the new full-hybrid version, the most-expensive Dacia yet.
“The entire range is doing well,” he said.
(ANE)