Florent Chaix: Good morning everyone and welcome to Renault Group's Q3 revenue call. Thank you for joining us. With me today, Duncan Minto, our CFO, together with Fabrice Cambolive, Chief Growth Officer and CEO of the Renault Brand, and Katrin Adt, CEO of Dacia. Please note that this call is being recorded and will be available for replay on Renault Group's website.
Florent Chaix: As usual, before we start, I'd like to remind you that today's discussion may contain forward-looking statements reflecting the group's current expectations. Actual results may differ due to a number of risks and uncertainties, as detailed in Renault Group's public disclosure. Duncan will walk you through the key highlights of the quarter, and we'll then move to a Q&A with Duncan, Fabrice, and Katrin. Duncan, the floor is yours.
Duncan Minto: Thanks, Florent. Morning, everyone. Afternoon, if you're joining. Thank you very much for your presence today, as always. Maybe I should start with the key message today would be that the Q3 played out as we expected. Revenue was resilient. The quality of the revenue bridge that you'll see remains solid, and we confirm our 2026 financial guidance. Let's begin with the, excuse me, clear acceleration in EV demand. In Q3, our EV passenger car sales in Europe increased by 85% year on year, bringing growth over the first nine months to 59%. This reflects the strength of our refreshed and attractive lineup, our dealer and after-sales network, and the financing solutions offered by Mobilize Financial Services. Our captive is a key commercial enabler.
Duncan Minto: It makes the transition to EVs more accessible through competitive financing and leasing solutions, supports dealer activity and customer conversion, and helps sustain loyalty and residual values over the vehicle lifecycle. Our manufacturing and supply chain set up allowed us to capture this commercial momentum, and I congratulate the efforts done by all of the teams. Our plants are running at high utilization rate, 85% worldwide and above 95% in Europe, and we've added a third shift in Douai to sustain the pace. At the same time, inventory management remains disciplined. Total inventory stood at a healthy 532,000 units, with a more pronounced destocking at independent dealers than last year. Finally, at the bottom right, you'll see our European order book remains solid at around two months of forward sales, giving us good visibility while preserving the flexibility to align production with demand.
Duncan Minto: As always, we remain focused on retail sales rather than pursuing volume through low-quality channels. In Europe, retail accounted for 65% of our Q3 passenger car sales. That is around 20 points above the market average and grew by 5%. At the same time, in Q3, we reduced short-term rental and demo sales by 18%, despite these channels growing by 3%. This channel discipline supports residual values with Renault and Dacia 5 to 13 points above the market average. In turn, stronger residual values support competitive leasing offers and protect new car pricing. As a reminder, we estimate that one point of residual value is equal to around one point of discount. If we look at group volumes over the first nine months of 2026, Renault Group sold 1,662,000 vehicles, down 2.2% year-on-year. This headline reflects a contrasting brand and regional dynamics.
Duncan Minto: Let us look at those, starting with Renault brand sales, which rose 1.1% over the first nine months, taking the brand to second place in Europe. Renault brand outperformed the market across EVs, retail, and LCVs. EV sales grew by 75%, compared with 41% for the market, supported by renewed and attractive lineup. I would like to stress that even if still slightly dilutive on group margin, our EV growth is profitable. Retail sales increased by 20% versus 11% for the market, reflecting the focus on sales quality. At the same time, Renault brand decreased its short-term rental and demo sales by 22%, while the market was strongly up. Finally, LCV sales rose by 8% in a market growing by only 1%. Master led the large van segment, while Kangoo and Trafic both ranked in the top three.
Duncan Minto: Turning to Dacia, as we had already mentioned, the brand did suffer from a lack of product to fully capture the market shift towards electric vehicles, particularly considering their retail focus. With Spring as its only EV and in transition phase ahead of the model's renewal, Dacia's addressable market was reduced significantly. As a result, sales declined 12.8% in Q3 and by 9.7% over the first nine months. This temporary product gap was amplified by an exceptionally high comparison base in Q3 previous year and stronger Chinese competition, particularly in the C segment.
Duncan Minto: Dacia nevertheless remained on the European retail podium, with Sandero retaining its position as the best-selling passenger car among retail customers. At the same time, electrified vehicles continued to gain traction, reaching 31% of the sales mix. Full hybrids alone accounted for one out of four Dacia sales, making Dacia the fourth largest full hybrid brand in Europe.
Duncan Minto: Beyond EVs and hybrids, LPG, representing 39% of Dacia sales, remains a key pillar of Dacia's value proposition, materially lowering running costs and reinforcing its total cost of ownership advantage. Looking ahead, Q4 should progressively benefit from the ramp-up of Sandero hybrid, the new Spring, and of course, Striker. Every Dacia model now offers an electrified powertrain. Q4 will also benefit from a stronger order book supported by improved order intake in the recent months. Turning to Alpine, registrations rose by over 60% to more than 12,000 units over the first nine months, already exceeding last year's volume full year. A290 led this growth with more than 8,000 units registered, while September was the best ever month for EV orders. Although its nearly 2,000 registrations remain below our volume ambition, the A390, which is now available in GTS version, is progressively establishing a second pillar for Alpine's electric growth.
Duncan Minto: Turning now to the wave of the next products. Our product offensive is fully electrified, reflecting the two complementary pillars of our strategy: all-electric vehicles and hybrids. This approach allows us to capture accelerating EV demand while offering hybrid alternatives suited to different customer needs and charging infrastructure. Our launch momentum continues in the H2 with the new Megane E-TECH, Trafic Van E-TECH, and Duster E-TECH for India, alongside the Dacia launches I just mentioned a couple of seconds ago. Alongside these electrified launches, Niagara will also support our international product offensive. Their contribution will build progressively with a full year effect in 2027. Moving from product to the figures, let's go through the Q3 revenue and the main drivers behind the evolution. In Q3, group revenue reached EUR 11.6 billion, up 1.5% on a reported basis, while registrations were down 6%.
Duncan Minto: Automotive revenue was stable year on year at EUR 9.8 billion. We'll dive into that in a couple of seconds. Before that, Mobilize Financial Services revenue increased by 11% to EUR 1.8 billion, confirming the strength and recurring nature of the captive's contribution. In other words, despite lower volumes and without pushing the metal, we kept automotive revenue stable and grew group revenue. Over the first nine months, group revenue reached EUR 41.8 billion, up 7.1% compared to last year. Drilling down to the stable automotive revenue in Q3, starting with currency, it was mainly related to the appreciation of the Brazilian real, the Colombian peso, partially offset by the depreciation of the Turkish lira. The second bucket volume effect was negative at 5.9 points, reflecting both the declining group registrations in a challenging environment and the higher destocking this quarter at independent dealers.
Duncan Minto: Lower volumes were offset by sales to partners and positive price and mix effects, keeping automotive revenues stable. Looking now at registrations in Q3, group sales declined by 6%, reflecting contrasting brand and regional dynamics as discussed. We start by focusing on the Renault Brand sales. On international markets, Q3 was clearly intense, notably in Latin America, declining markets in Turkey, Argentina, and South Korea. In Europe, PC sales were up 6.3%, thanks to two main catalysts, EV and retail. EV sales doubled in Q3 against a market growing by 55%, supported by the success of our renewed lineup. Twingo E-TECH Electric has recorded nearly 26,000 sales since its launch and already ranks first in its segment. Retail sales increased by 31% compared to 12% for the market. A strong demonstration of the focus on sales quality.
Duncan Minto: Moving to Dacia, as we just commented, Q3 sales were down 12.8%, but I must highlight the high comparison base from last year in Q3. And finally, Alpine maintained the strong growth momentum with sales up 58%. Importantly, the decline in registrations did not translate into inventory build. Total inventories stood at 532,000 units, as you can see on the chart. The end of September, this is down compared to June as per our guidance. Independent dealers reduced their inventories by 118,000 units in the quarter versus 97,000 units in the Q3 of 2025. At group level inventories followed their usual seasonal pattern and stood 220,000 units, in line with the end of September last year. As mentioned earlier, this healthy inventory management is supported by a solid order book of around two months of forward sales in Europe.
Duncan Minto: Looking to year-end, we expect total inventories to trend towards the lower end of the 525,000 to 550,000 range we give, enabling the group to smoothly operate in the last quarter. Sales to partners had a strong positive effect of 4.9 points in the revenue growth, driven by two main factors. Firstly, our partnership with Geely in Brazil is strengthening. It is the ramp-up of the distribution of Geely vehicles and the start of local production through Renault do Brasil joint venture since September. Secondly, in India, the integration of RNAIPL since the consolidation point, which was 1 August 2025, contributed another EUR 165 million or 1.7 points of growth in Q3. Ongoing partner programs also contributed to this performance. I could note Nissan Micra, Mitsubishi Grandis, and Eclipse Cross.
Duncan Minto: If we review the next point, which is price, product mix, and geographical mix effects. The price bucket was positive at +1.1 points. Price increases on international markets to offset foreign exchange effects were partly offset by pricing pressure in Europe. Higher battery trim versions for the Renault 5, as an example, as well as HEV powertrain for Duster and Sandero also supported the positive price effect. Product mix was solid at 2.3 points. It was driven by the transition from Clio 5 to Clio 6, which is a higher average selling price, also by the light commercial vehicles, Master and Trafic, and the success of our EVs. The geographical mix contributed positively at +0.5 points, mainly thanks to higher sales in France and Germany, and a lower exposure to Argentina. The last point in this quarter is the other effect was negative at -3.1 points.
Duncan Minto: This mainly reflected a return to a more normal inventory level at Renault Retail Group, or RRG, which is our wholly owned independent dealer network, after particularly low levels at the end of June 2026. By the end of September, RRG's inventories were back in line with the same period of previous year. Mobilize Financial Services delivered another strong quarter. New contracts increased by 1.6% year on year, while average performing assets grew by 5%, supported by the increasing new financing and higher average vehicle selling prices over recent years. As a result, MFS revenue increased 11% to EUR 1,761,000,000 in Q3. If we now move towards the end of the year, while the environment has changed a lot since the start of the year, our commitment has not.
Duncan Minto: Beyond the challenging market conditions, this year has brought a sharp shift towards electrification, yet we confirm our 2026 financial guidance with a group operating margin of around 5.5% of group revenue and an automotive free cash flow around EUR 1 billion. As stated at the H1 results, we continue to expect a slight improvement in operating margin in H2 versus H1, with the usual seasonal uplift expected to be less pronounced than in previous years due to higher raw material costs and inflation. Our confidence rests on the strong fundamentals I have described, supported by the relentless execution on purchasing performance, productivity, and strict cost discipline. To conclude, Q3 demonstrates the strength and agility of our operating model.
Duncan Minto: Our three complementary brands, highly utilized, flexible industrial footprint, strong dealer and after-sales network, and supported by Mobilize Financial Services, this has all allowed us to switch, adapt swiftly to a changing demand while protecting value. That is what is at the core of futuREady, and it is in action. I thank you for your attention, and we are now ready with the team to take your questions.
Florent Chaix: Thank you, Duncan. The first question will come from Thomas Besson from Kepler Cheuvreux. Thomas, can you please open your microphone?
Thomas Besson: Sure. Thank you, Florent. Good morning. I have two questions, please. The first is, as you just said, Duncan, the environment has changed quite substantially over the last few months. Can you just help us understanding a bit better what allows you to offset what is going to be ultimately lower volumes in H2 than you probably initially planned? What looks like a bigger push from Chinese automakers in Europe before the introduction of the hybrid cap, substantially higher input costs, and a bigger shift to electrification. Any kind of figures on the headwinds and the pluses you can see against that would be very helpful. The second question is about the evolution of used car prices in Europe. They have been sliding quite substantially over the last couple of months. I understand that you are doing everything you can for maintaining your own residual value substantially above market average.
Thomas Besson: Do you still see a negative impact, or do you believe that your retail policy isolates you from these issues about declining used car prices? Thank you.
Duncan Minto: Thanks, Thomas. Thank you for your questions. The environment has been quite different. I would say the environment had a more dramatic shift between Q1 and Q2 for us than in Q3, which has pretty much run in line with our expectations as we set it out in July. I maybe say that when we talked about input costs, we called that in February, EUR 600 million between raw materials and inflation. We had a EUR 200 million impact in H1. We confirmed that figure in H2. It is not something that has taken us by surprise. I would say that is in line with our expectations. Clearly, there has been a continuous rise in demand in EVs, certainly in the retail markets in Q3. We have seen the big switch in Q2 that has picked up in Q3.
Duncan Minto: There is an increased pressure, and we are feeling it, I would say, on Dacia side in the C segment, I guess, in terms of Chinese competition. But we have been working internally on execution. You know our vision on fixed costs. These are things that we control. That is something you will see in the full-year results, which has the proof in the pudding. In terms of variable costs, we have a guidance of over EUR 400 per unit on average over the years. We achieved that in H1, and you will see the strong dynamic continues with some excellent work between purchasing and also our suppliers. Cost, obviously, we believe we have a strong dynamic, and it is helping us offset slightly lower volumes. But things have not changed dramatically since how we saw the outlook in July when we presented H1.
Duncan Minto: Maybe on used car prices, Fabrice Cambolive, do you want to say something about Europe?
Fabrice Cambolive: Yes. Used car prices and the residual value. As you say, we have a competitive advantage to have a better residual value than most of our competitors, between 5 and 10 points in the main five countries in Europe. It is not by chance because we are doing a zero-risk commercial policy in terms of residual value. What does it mean? We are lowering our short-term rental volumes. It means in six months, in nine months, we will not have the problem of the market, which is far above what we are doing in terms of reselling buyback from a short-term rental. We are focusing our commercial policy on retail. It means most of our used cars which are coming back are buyback from retail consumers, which are coming back in our network. We are monitoring that very carefully. What do we see?
Fabrice Cambolive: First of all, we do not have any overstock in terms of used cars. We do not have aging stock in terms of used cars. We have now a slight move. It means the residual value of the EV is improving, and the residual value of the ICE is slightly decreasing. We are monitoring that very carefully, and we have action in place to make the resale of this car seamless with our network, and it is part of our competitive advantage we presented in the future review with this full life management. I would say that this is under control, and we are structurally resilient on that due to our very safe commercial policy.
Florent Chaix: Thank you, Fabrice. This is Thomas. This is also favored by the very good support and the common work done with Mobilize Financial Services, with a prudent approach on residual values overall, thanks to a third independent party's estimates. I guess we are conservative in our mode, whereas we might see that some of our peers are more aggressive on the residual values they set in the first buybacks of the cars, and so might struggle more as well in the used vehicle market afterwards. I hope we answered your question.
Duncan Minto: Thank you.
Florent Chaix: Thomas, thank you. The next question will come from Horst Schneider. Hi, Horst. Good morning.
Horst Schneider: Good morning. Thanks for taking my questions. The first question that I have relates to product mix effect in Q3 because it comes down sequentially, maybe doesn't mean anything for earnings. But I would have thought that the product mix effect is stronger given EV sales increased that much, and Dacia was down. Maybe you can explain the effect and what we should expect going forward. The number 2 is we saw from some companies, especially from the US car makers, we saw some comments about material cost impact in 2027. Whatever statement you can make, what kind of impact you expect would be helpful. The last one that I have is regarding this EV share, and you are growing nicely the share in the market. Can you maybe share what is now the share of the BEV sales in your order book? Thank you.
Duncan Minto: Hey, Horst. Thanks for the questions. Product mix, you kind of answered it yourself, so yeah slightly lower than your expectations, perhaps. I think we need to look at the fact that we've been doing it quarter after quarter after quarter, so the comparison bases start to get a little bit more complicated. I don't think it has a dramatic impact on earnings. EV mix in our order book, I'm not sure if I have the specific B-
Florent Chaix: Yeah
Duncan Minto: percentage. Yeah, but for B segment. We'll see if we've got the-
Horst Schneider: Not B segment, in general.
Duncan Minto: Oh, in general.
Florent Chaix: Oh, in general. Sorry, I heard B segment. In general, this is 40% of the total order book to be compared to 28% a year ago. What is very interesting for us is that we see that the order intake year to date for EVs is growing 60% compared to the previous year. So a strong dynamic. Again, I think it is very important, as you mentioned, the price mix on the profitability of our electric vehicles, that we are profitable on all our electric vehicles. This is not the case for some of our competitors out there. It must be highlighted as well that the profitability on the A and B segment vehicles, which benefit notably from shorter development time and a more competitive platform, RGEV small, are above the profitability of our C segment EVs for the time being.
Florent Chaix: This will be solved with the continuous cost improvement that we deliver on the C segment cars towards 2028, and the introduction of RGEV medium 2.0 platform in 2028. All in all, I think this is something that everyone needs to keep in mind. EV is, yes, dilutive still at group level, but the margins that we generate on our EVs are clearly very decent and not as dilutive, I believe, as some may imagine.
Horst Schneider: That means the rising BEV share is still diluted for margin in general. Is it a margin burn going forward or not?
Duncan Minto: Yeah. Maybe not going forward eternally. I think as Florent just pointed out, going forward in the short term, yes, it is still dilutive. But as we work further on cost reductions and the introduction of new platform, that switches back in time.
Florent Chaix: And keep in mind that on the hybrids, we also continue to work on the cost. This is something that is notably enabled by HORSE Powertrain. We have a target of reducing by up to EUR 1,000 per HEV powertrain, the costs in the midterm. So this is also delivering, and this is a competitive advantage that many of our peers don't enjoy.
Duncan Minto: That target will soon become a reality. Maybe just to come back, because you said about material costs in 2027. So, I think that is something we will bring up and quantify in February, when we give the full year guidance. But it is not a surprise. We knew that is happening. We have rising raw materials. We have memory, RAM cost, and we have electric components. This is something that is hitting the market in general, and that is why you need to not forget the fact that we are targeting to do a EUR 400 per unit variable cost reduction, on average year by year. So this was built into the plan.
Horst Schneider: Okay. And last one, Duncan, all the best, yeah, for the future.
Duncan Minto: Thank you.
Florent Chaix: Thank you, Horst.
Horst Schneider: Yep.
Florent Chaix: The next question will come from Jose Asumendi, from JP Morgan. Jose, the floor is yours.
José Asumendi: Thank you very much. Let me start saying also, Duncan, thank you very much for the great collaboration over the past years. All my very best wishes. A couple of questions, please. Can you talk about what is a little bit behind the pricing number? Again, positive in the quarter, a little bit the puts and takes. I am trying to see if there is also some strength of the product that is reflected there on that pricing momentum, or is it part of that mix of BEV versus ICE, et cetera. Second, Duncan, on Dacia, please correct me if I am wrong, but I tend to think that this is a high margin product that delivers higher margins than the group. Should I be concerned that deliveries are down on the quarter? Will Dacia sales rebound going forward? Any thoughts around that topic as well?
José Asumendi: Thank you very much.
Duncan Minto: Okay. Thanks, Jose, and congratulations on your award recently. Pricing, what is behind it? I think Fabrice Cambolive has already commented on, in terms of the value of a long-term approach to quality sales channels. We have not been pushing the metal, and that allows us, combining the use of MFS to offer competitive financing offers to our customer and monthly rentals and leasing. We have had, in that positive pricing bucket, some impacts of version mix going up, and also on the R5 in particular, but also across Dacia, with hybrid coming on Sandero and mix improving on Bigster and Duster as well. I think we have put the figures on the slide, Jose. We are not participating in channels that have high discounts and put pressure on residual values going forward. It is really discipline coming through there.
Duncan Minto: In terms of Dacia being higher than average, yes, Dacia is higher than average in terms of margin. We need to take into consideration that we knew that this would change over time as well. Hybridization, having a full 100% electric offer. Even if we look at the switch from old Spring to new Spring, in fact, there is a big positive swing in profitability when you compare the two products there. But in terms of sales dynamic, Katrin Adt, do you want to maybe add something on what is going on with Dacia at the moment?
Katrin Adt: Yes. Thank you, Duncan Minto, and hello, Jose. As Duncan Minto already said, 2026 is certainly somehow a transition year for Dacia towards electrification. We just launched the new product, Sandero hybrid, best-selling car in the retail market. Spring, full electric. Striker with the most efficient hybrid engine in the market. We are quite confident to increase volumes going forward.
Florent Chaix: Jose, did we get everything for you?
José Asumendi: Thank you very much.
Florent Chaix: Thank you.
José Asumendi: Got everything. Thanks so much. Appreciate it.
Florent Chaix: The next question will come from Pushkar, from HSBC. Hi, Pushkar.
Duncan Minto: Pushkar, we cannot hear you.
Pushkar Tendolkar: Oh, hi. Can you hear me?
Duncan Minto: Yeah.
Florent Chaix: Yeah.
Pushkar Tendolkar: Sorry. Can you hear me?
Duncan Minto: Yeah.
Pushkar Tendolkar: Okay. Sorry to just come back on this topic of Dacia again. You have said that the struggle through, or the pressure in 2026 has been because there was lack of BEV product. There is not much BEV product coming through in 2027, right? I am just wondering, just directionally, 2027 is still a year where you face pressure. Would that be a correct assumption? There is no reversal of the weakness that we saw in 2026. That is the first one. Then on the order book, typically the Q3 order book is a little bit on the lower side compared to Q2, and that is because of the seasonality, the phasing of forward sales, right? It was not the case this time around. What does this mean from a retail sales point of view for Q4? Just trying to understand that. Thank you.
Duncan Minto: Catherine, maybe we will let you answer Dacia first.
Katrin Adt: Yes. Thank you, Pushkar. We are confident for 2027 because we have a full year then of Spring. Spring, which is made-in-Europe and also eligible to governmental incentives in some countries. We have a two-leg strategy, so we are not only building up our EV portfolio, but we have also hybrid now on the entire models. So we have an electrified portfolio. We are already the fourth brand in hybrid, and we are intending to develop in that even more. It might be also that we see a little surprise in 2027 also besides of that.
Florent Chaix: For the models, Dacia year to date, 9 months was down nearly 10%. We do expect the full year sales to be in negative territory against last year, with Q4 sales to be slightly above Q4 2025. So, keep this in mind for your model. The second question you had, Pushkar, was on the order book. The order book was around 2 months. In fact, it was slightly below 2 months as a precise figure, which is absolutely normal because this forecasts the forward sales. As you can imagine, Q4 sales are always higher than Q3 by seasonality, so there is no change to that seasonality this year. In terms of order book, we do not communicate on the detail, per nature of channel mix. But, as explained by Fabrice, the focus is really on the retail.
Florent Chaix: We want to make sure that we protect margins and have a high cash flow conversion. This goes through retail, while in the meantime, lowering the short-term and demo channels exposure. This is really the strategy of value, and this is enabled because we have, again, a high utilization ratio for capacity. We can bring some flexibility in our economic model, to make sure that we don't build something that would destroy value over the long run, notably on the residual values.
Pushkar Tendolkar: Thank you. If I can ask just one more on the sales to partners. The India effect would go out of the bridge in Q4, but the Geely effect would continue. Can you just talk about the sequencing of these projects or partnerships so that we get an idea of how this moves, not just Q4, but then beyond that?
Florent Chaix: Well, in fact, the sales to partners will remain a good support for us moving forward in the medium term. We started the distribution of Geely cars in Brazil in July 2025. In September, we started to produce the Geely cars in the Renault do Brasil factory. This is gaining momentum on that front. As you know, we ramp up Nissan Micra and Mitsubishi Grandis and Eclipse Cross, as mentioned by Duncan. Next year, we will have the Nissan Pixo, which is the derivative of Twingo, that will start to kick in. We continue as well to work on LCVs for our Nissan colleagues in Europe. We produce for Nissan in India for the local and the export market. This is set to continue. 2028, we will have Ford first BEV kicking in.
Florent Chaix: This is, again, another demonstration of our ability to be competitive and provide with the best economic model for our partners, including in Europe against Chinese competitors. This is set to continue, and we will be vocal around potential other announcements. We are not close to partnership opportunities, as you may know.
Pushkar Tendolkar: Thank you, Florent. Thank you, Duncan, and all the best for you.
Florent Chaix: You are welcome. Thank you, Pushkar. The next question will come from Philippe Houchois from Jefferies. Philippe? I do not see your hand anymore. I do not know whether Philippe is connected or not. Philippe, you can press star six to unmute your phone.
Philippe Houchois: Can you hear me?
Florent Chaix: Yeah, Philippe, we hear you. Yeah.
Philippe Houchois: Hello?
Florent Chaix: Yeah.
Philippe Houchois: Yeah. Okay. Sorry about that. Yeah, thank you very much, and good morning to you all, and all the best, Duncan. I have a question, and it is as much as a comment as a question, but one thing I noticed is most of your peers have talked about very strong order intake in EVs, and therefore a backlog. Some of your peers have also had a problem producing enough. In your case, you have got a very strong performance and no unusual order book. Just wondering any comments that you have in terms of having secured better sourcing of batteries or smoother manufacturing process to make sure that you actually gain share in EVs, but also do not have a kind of an unusual backlog. Any comments on this would be helpful.
Philippe Houchois: Then my question is more, I think we have been used for years to this idea that Dacia is a much more profitable brand than anything else in the group. You are having quite a good year despite Dacia being down. We know about the shortage of models in electrification. Going forward, should we stop assuming that a better Dacia is definitely going to uplift the margin? Do we have basically a more homogeneous margin across LCV, Dacia, and Renault cars? Thanks.
Duncan Minto: Okay, Philippe. Thank you for all the questions. I did say when I called out to congratulations to the Renault teams, both across purchasing, supply chain, manufacturing, and the agility and flexibility that was demonstrated in reacting to demand. My colleagues on the right-hand side of the table here jump up and down in all of the management meetings, trying to get every single EV we can, and they have done a fantastic job to be able to respond to that. In terms of saying, are we better than our competitors, I will let you judge. But certainly, we have worked strongly with partners in terms of suppliers, and we have multi-sourcing options. We are already well using our capacity, but we have added a third shift in Douai.
Duncan Minto: We are meeting the demand, and I had coffee this morning with Thierry Charvet, who is our Head of Manufacturing and Quality, do not foresee any issues through the end of the year. So quite comfortable on our ability to deliver that. Let us be honest, though, when we talk about an order book of circa two months, the EV order is a little bit higher than that, and the ICE is a little bit lower. We are still managing to meet demand, but it is true that the order delivery delay for EVs is growing, and we are doing everything we can to meet that demand. In terms of your second question, which is Dacia, which is more profitable, this is maybe my fault if I have given you, in the past, some kind of expectation that the gaps are massive. We do have a higher profitability.
Duncan Minto: We have vehicles in the Renault range that match that. You mentioned LCV as well. The evolution of profitability over time is something we took into the futuREady plan. When we talk about increasing the availability and mix on the hybrid side, obviously you are adding a second power unit to an existing car, so there is higher cost in there. That puts pressure on margins. Florent talked about the EUR 1,000 cost reductions and the contribution of HORSE over time. There is a dynamic that was taken into account in our plan, and that will play out over time. Obviously, EV, we said, was dilutive, but it is profitable, so this means that the gaps that maybe the market is imagining compared or across different brands or different powertrains is not as wide as one may first have believed. Cost reduction is key.
Duncan Minto: Technology is key, and developing things in a shortest time possible is also a big driver, and these are things that we have proven with the launch of Twingo and Spring to date, and I think you will see in the dynamic going forward.
Florent Chaix: Thank you, Duncan.
Philippe Houchois: Thank you very much.
Florent Chaix: Thank you, Philippe. Thomas, you raised your hand. As it is a follow-up, if you do not mind, I would like to take Mikael Foundoukidis' questions first. Mikael from Oddo BHF. Good morning, Mikael.
Michael Foundoukidis: Yes. Hi, do you hear me?
Florent Chaix: Loud and clear.
Michael Foundoukidis: Good morning. Thanks for taking my questions. Maybe a question on hybrid caps on Chinese OEMs. It has been discussed. We had some news, but any update on your side? That is the first question, and then on the made-in-Europe development as well, and the CO2 change, what does it mean for Renault in maybe in 2027 or 2028? Those are the two questions. Thank you.
Duncan Minto: Okay, Mikael, thank you for those. This is obviously some breaking news that has happened in the past few months, but we welcome the European-China agreement to limit imports. We have been advocating for quite a time, I think François was very vocal on that point, that a deal would be good. The recent announcements are positive. This agreement is important. The France and Germany alignment, both are important automotive countries. We expect to have more visibility of the final conclusions, I guess, in the coming weeks. But at this stage, and despite the flexibilities that were introduced, the main risk of which was the CO2 2030 target remains probably insufficiently covered. The text is very complicated. In fact, a set of five different texts. The negotiation process probably does not take into account the reality of European industrial ecosystem today. So let's see.
Duncan Minto: We think things will come forward in the near future, but we still think there are certain things that need to be discussed.
Florent Chaix: Thank you, Duncan. Thank you, Michel. We will take Thomas Besson. Thomas Besson, can you please open your mic, Thomas?
Thomas Besson: Sure. Thank you very much. I just have two quick questions, because I think there are others who are trying to ask questions as well. The first one is, on the sales to partners, and the additions, notably of the Geely partnerships in South America, can you remind us the contribution of this to your operating profits, and notably these new partnerships, have they effectively boost your numbers or not? The second, you have not said much about the performance of Renault in international markets. Of course, international markets have been very adverse in Q3. Can you just make a few comments on this? I do not think it is changing dramatically the picture for your H2, but still it is quite sobering to see that, for the time being at least, we are not seeing much dynamic. Thanks.
Florent Chaix: Thank you, Thomas.
Florent Chaix: Well, Thomas, before maybe handing over to Fabrice Cambolive about the performance of Renault in international markets, sales to partners is, we do not do things at a loss, so it is a positive contribution to our operating margin. It was built into the plan, and as Florent just went through a couple of minutes ago, there is a dynamic which is continuing in the coming years. Obviously, it is something where fixed costs are paid by the partner up front, and then we are benefiting from a variable margin. So it is not a minor part, it is an important part. But we ensure, and I would like to remind you of that we design and take the decision of profitability on programs without partner volumes. So it is a pure upside compared to the decisions taken and investments done by Renault Group.
Florent Chaix: And this explains as well, Duncan, why the return on capital employed at Renault is so strong. Please compare to our peers. You can look at the cash conversion. We can speak about margin as well in percentage, but at the end of the day, the use of cash is very good and proving to be superior to many of our European, US, and Asian peers.
Duncan Minto: Fabrice Cambolive, on international, maybe you could talk about.
Fabrice Cambolive: Yes, we can do a little world tour. I would say, in our historical markets, the situation of Renault is quite good. Turkey, we are improving our sales, and we are outperforming the market despite, since a few months, a market drop, which is what is explaining the Q3 decrease. Nevertheless, Renault is remaining the first brand in Turkey with better share of market. South America, we have a different situation. Argentina, we are monitoring our profitability. That is why we are down in terms of volumes, taking into account the situation. On Brazil, we are improving, thanks to Kardian and Boreal. And we will have, in South America, two very important launches in the coming months, in the LCV part. First, with Niagara for Argentina and Brazil, and second with the renewal of Master, which is also a big chunk in South America. Korea is suffering.
Fabrice Cambolive: Korea is suffering, but we have, I would say, a quite small exposure there. And India is ramping up with the arrival successively of the new models and the new engines, which are very important to make the electric transition also in India. So diverse situation, but all in all, a very, I would say, good risk management there.
Florent Chaix: Thank you, Fabrice.
Thomas Besson: Thank you.
Florent Chaix: Thank you, Thomas. The next question will come from Stuart Pearson from Oxcap Analytics. Good morning, Stuart.
Stuart Pearson: Yeah, good morning, guys. Thank you for taking the question.
Florent Chaix: You are welcome.
Stuart Pearson: Apologies if I come back to something you have already covered. I have been multitasking this morning. I just wanted to come back quickly, actually, on Thomas' first set of questions on a little bit around the pricing environment and the Chinese push into Q4. I am not sure we totally covered it. Obviously, in your bridge for the revenue side, it is a positive number, which is obviously, as you called out, helped by FX and EV, et cetera. I just wonder, when you think about the H2 price mix enrichment component, I think it was -425 in H1, just how that might look versus that number in H2. Are you having to work much harder on cost to make this guidance, I presume? Is that number getting worse?
Stuart Pearson: I think Stellantis saying this week that pricing, at least sequentially, wasn't any worse in Q3, but they're still down 300 bps year on year. Just interested to get a little bit more color on pricing, especially the Chinese pushing a lot of imported volume into Europe ahead of any, I guess, quotas. Yeah, keen to dive into that. Then just quickly on one specific model, the Clio, obviously updated model around this time last year, I think, seems to be fading a little bit. I do not know if that's sort of cannibalization into Renault 5, Renault 4, whether that's just a capacity allocation issue on your side or just what's going on with that model would be helpful. Thank you.
Duncan Minto: Okay. The first question was Chinese competition pricing outlook going forward. You can see that, yeah, the price was +1.1. You did not miss much of the call, so you're efficiently multitasking. We did have version mix in that, which is benefiting from as well. We did not have negative FX, as you pointed out. But we did have negative FX in some markets, and prices were raised to compensate that. Obviously, there are 20 points more than average market exposure to retail markets where we're playing there, and we're playing it in a safe way, as Fabrice Cambolive discussed. Not heavily discounting and not suffering with our residual values being significantly higher than competitors as well. Are things sequentially getting worse? Well, I think other people have called out that they do expect positive pricing in 2027.
Duncan Minto: I think this maybe goes hand in hand with input costs rising. So if you have raw materials going up period after period, you have memory increasing, and you have electronic components, that maybe our competitors will follow us in some of the pricing actions that are being taken, even as of right now. In terms of expectations, though, for H2, it's not something we were counting on as a positive. As you said, we had 425 in H1. I expect some similar number of H2, and that was what we took into account in our guidance. The question on Clio cannibalizing with R5, or was it production? Fabrice, do you want to?
Fabrice Cambolive: No, regarding Clio. We are focusing with Clio on retail because this is where we want to make the difference. If you take a comparison year on year between Clio 6 and Clio 5, we are improving our level of orders on retail for Clio by 20%. It means there is no cannibalization at all with R5. What is happening on the Clio is that now, with this commercial policy focus on value, we are not selling so many cars on fleets, waiting for a better competitiveness in terms of hybrid. This is why could explain sometimes some differences, but once again, we do not need that, and we prefer to push. In fact, to push, to sell the natural demand we have on Clio retail hybrid, which is a highly demanded product.
Florent Chaix: Thanks. Maybe just to complete my comment, Stuart, because you talked about pricing, but also about competition. We are not expecting a Q4 in volumes massively up, so it is stable to slightly positive overall, and that is something that also was taken into account in what we are looking for H2.
Stuart Pearson: Okay. All right. Thank you. Best of luck for the future, Duncan. I think the fact that we are even here talking about Renault doing 3% auto margins in H2, when Audi just reported zero and Mercedes will do zero in Q4, it is a long way from where we were talking about when you first started in IR, Duncan. So good luck for whatever comes next.
Duncan Minto: Thank you, Stuart.
Florent Chaix: Thank you, Stuart. Have a good day. We know, by the way, that it is not sunny in London. So the next question will come from Henning Cosman. Henning, can you please unmute your phone?
Henning Cosman: Hi, can you hear me?
Florent Chaix: Very well.
Duncan Minto: Yeah, we can, Henning.
Florent Chaix: Thank you.
Henning Cosman: Okay, super. Good morning, everybody. First question, Duncan, excuse my ignorance, but if you could just explain again this destocking effect in the others bucket from the RRG. How is that different from the destocking effect that is in volume? Do you treat that separately? So basically, the RRG is that inventory reduction within group inventories, whereas the volume destocking effect in the volume bucket is destocking on the independent dealers. Is that how we read it? Ultimately, it affects the bridge in the same way. If you could just explain that again, please. The second question is, frankly, I am a bit surprised about your comments that you said for you, the shift had been bigger from Q1 to Q2 than from Q2 to Q3, just because it is so much more different from what the others seem to be seeing.
Henning Cosman: I am surprised, actually, it has not come up, just with respect to your margin guidance, the around 5.5%. I believe in the H1 call you said, you see yourself at the bottom end of a 5.3% to 5.7%. So if you could just reiterate that. Is that still the case? Is it around 5.5%? Is it really more 5.3%, which is the bottom end of that range? If that is the case, how, right? Which again, goes back to not seeing as much of a shift as all your competitors. Inflation inevitably is higher. You are selling more EVs, I think, than you expected.
Henning Cosman: Dacia, I think, is certainly a bit lower than you expect to get at the beginning of the year. Yet you managed to retain that bottom end of the guidance range, at least, I suppose so. So could you just talk about then the offset, perhaps? Surely then you must have more success in saving more cost, having better execution to offset a little bit the things that have been slipping in the course of the year. If we could just touch on that one more time. Thank you very much.
Duncan Minto: Yes, Henning. Let us have a go because it was very much the theme of Thomas's question right at the beginning. First of all, to answer you on destocking, I think you described it perfectly. Yes, we measure in our volume impact, all of the invoices we make to the dealer network, be it independent or our wholly owned dealer network. Then in the last bucket at the end, we adjust where we have not actually externally revenued that out of the group, in the case of a stock increase at RRG. So that is how that fits into the walk. I just point out that it was a low point in June, so it is more of a normalization of the level of stock at RRG. It is not an overstocking situation. But that is how it happened in the walk down.
Duncan Minto: If I haven't explained it clearly enough, I'm sure Florent can have a second go at it because he's much better than me. My comment on the more of a change in the environment for Q1 to Q2, obviously, as we saw rising fuel prices, rising raw materials at the same time, rising inflation. I think maybe it's just because we're very focused on the retail market, but it was around a quarter of retail customers walking in asking for an EV in Q1, and it doubled in Q2 for some markets. That has continued. So we've been able to adjust our production and supply to meet that demand. In terms of raw materials and input costs, when we talked at the H1 stage, even probably when we talked in February, we were talking about EUR 600 million impact.
Duncan Minto: EUR 200 million was the H1, EUR 400 million between raw materials and input costs in the second, and we're still seeing that in line. So yes, volumes might have been reduced slightly where we are not overstocking, where we are adjusting capacity in line with demand. So yes, we have had to up the execution on variable cost performance and fixed cost performance. I think as my opening comments on Q3 were, things pretty much ran to plan. This is not a huge surprising quarter for us. So the guidance we gave in July, to be complete on your list of questions, was around 5.5%. As you say, that range means 5.3% to 5.7%, and we are more in the bottom half of it than the top.
Florent Chaix: Mr. Duncan, thank you, Duncan. All the best to you.
Duncan Minto: Cheers, Henning.
Florent Chaix: Thank you, Henning. Have a good day. This was our last question, so we will soon close the call. Before we let you go, on behalf of the group, Duncan, I would like to thank you for nearly three decades at the service of Renault Group. We all know around the table what it takes to succeed in the auto industry, especially in the mass market. Congratulations for that. Thank you, and we wish you all the very best in your new challenges, which will come very shortly. All the best, and to everyone, we will meet you today during the roadshow in Paris and virtually, and if not, let's speak soon. We will be around in the last months of the year to meet you all in the main financial places. Thank you and have a good day.
Duncan Minto: Thank you, everyone. Thanks to everyone on the call today.
Florent Chaix: Thank you, Duncan.
[Company Representative] (Renault Group): Thank you, Duncan.
