Renault’s ampere on track to meet EV goals, targets global rivals: Jefferies

Following a site visit, Jefferies analysts affirm that Renault's EV unit, Ampere, is on track to meet its financial targets, including EBIT breakeven in 2025, driven by a planned 40% cost reduction in C-segment EVs by 2027-28, primarily through lower battery costs. Ampere is targeting an annual production capacity of 620,000 units by 2028 and emphasizes a partnership model, particularly in software with Google and Qualcomm, to reduce capital risk, while maintaining competitive pricing, with models priced 15% to 30% below segment averages.

Analysis

Renault's electric vehicle unit, Ampere, is reportedly on track to meet its operational and financial objectives, including achieving EBIT breakeven in 2025, as confirmed by Jefferies analysts following a recent site visit. A cornerstone of Ampere's strategy is a significant 40% cost reduction targeted for its C-segment EVs by 2027-28, largely driven by an anticipated 50% decrease in battery costs stemming from lower raw material prices and diversified sourcing from suppliers including AESC, Verkor, LG Energy Solution, and CATL for both LFP and NMC chemistries. Further savings are expected from e-powertrain (25%), vehicle platform (25%), upper body components (15%), and manufacturing efficiencies at its brownfield Douai facility, which currently produces a vehicle in under 10 hours and aims for Eastern European cost parity within the year. Ampere is scaling production capacity from an existing 400,000 units annually towards a target of 620,000 by 2028 and has substantially reduced vehicle development times, exemplified by the next-generation Twingo's 21-month cycle achieved partly through its Chinese R&D center. The company differentiates itself through a partnership-centric model, notably with Google and Qualcomm for software, Volvo for Light Commercial Vehicle development, and Valeo for ADAS, to mitigate capital risk, contrasting with competitors' investments in proprietary gigafactories and software. This strategy supports a competitively priced vehicle lineup, with models such as the Dacia Spring starting at €17,000 and the Renault 5 at €25,000, priced 15% to 30% below segment averages, positioning Ampere to potentially close the estimated €2,000 to €3,000 cost premium associated with localizing Chinese EV production in Europe.

Key Decisions for Investors

• While Ampere's progress towards its 2025 EBIT breakeven target and significant cost reduction plans are encouraging, investors should note Jefferies' 'hold' recommendation on Renault stock with a €48 price target, suggesting a balanced perspective is warranted.
• Closely monitor Ampere's execution on its ambitious 40% cost reduction plan by 2027-28, particularly the 50% targeted savings in battery costs and manufacturing efficiencies at facilities like Douai, as these are pivotal to its financial outlook and ability to maintain competitive pricing.
• Assess the strategic implications and long-term viability of Ampere's partnership-driven, capital-light approach in software (with Google and Qualcomm) and components (with Valeo) against the industry trend of vertical integration, considering its impact on capital expenditure, risk profile, and innovation speed.
• Evaluate Ampere's competitive positioning stemming from its vehicle pricing strategy—15% to 30% below segment averages—and its stated objective to neutralize the cost advantages currently held by Chinese EV manufacturers producing in Europe through efficiency gains.