The £17,000 electric Renault Twingo is a statement of the brand’s price intentions
New Ampere electric division will use cheaper vehicle parts to close ICE-EV cost gap
Renault is banking on significant cost reduction on future electric vehicles to unlock hitherto elusive EV profits and take the fight to Tesla and China’s car makers.
That was the pitch by CEO Luca de Meo and chief financial officer Thierry Piéton to investors on Wednesday to sell them the benefits of Renault’s new Ampere electric division, which it wants to float on the stock market in the first half of 2024 – if it can achieve a solid valuation.
“Ampere is there to democratise EVs in Europe with cars that people can afford,” de Meo told investors at the event in Paris. “Our ambition is to close the gap, reaching EV and ICE price parity before our competitors.”
De Meo’s rallying cry to market Renault, since joining in 2020, has been that the company is moving into bigger, more profitable sectors to avoid becoming quite so dependent on small cars.
However, to underline the point about affordability, de Meo temporarily reversed that impetus to unveil a concept previewing a new electric Renault Twingo small car with a promised price of below €20,000 (£17,000). “Pure player competitors are lagging behind. So far, they have zero or very limited offer in the B-segment in Europe,” de Meo said.
Renault has been a long-time leader within the European EV sector with its Renault Zoe small car and has built on some of that with the 2022 Mégane E-Tech and forthcoming Scenic E-Tech electric SUV, both of which sit on a dedicated electric platform.
So far, though, Renault has failed to convince the stock market that it has the ability to head off considerable disruption in the EV space from swifter, more innovative players like Tesla, despite an impressive turnaround in its overall business leading to recent record profits.
Renault’s riposte to what it sees as the unwarranted indifference of the investment community is to spin off Ampere to create a separate division tasked with developing and building EVs mainly for Renault but also for Alliance partners Nissan and Mitsubishi. It will also look to create new revenue from the software that’ll power them.
“This is a fundamental reshuffle of our business model,” de Meo said. He told the assembled banking community that while 80% of Renault’s revenue today comes from “mature” segments, half of its business by 2030 will be focused on activities with “double-digit growth and double-digit profitability”.
De Meo (pictured below) unveiled a timeline for Ampere’s EV roll-out for Renault, including the Scenic and Renault 5 small hatchback next year, the Renault 4 small EV in 2025, Twingo in 2026 and two new models arriving before the end of the decade.
The Mégane E-Tech and Scenic E-Tech will also be replaced in 2027/28. Throughout all this, Renault is looking to slash EV costs by an ambitious 40%. “The Mégane and Scenic successor will deliver the final blow, reaching price parity with the ICE vehicle,” de Meo said.
Renault claims to be already ahead of rivals when it comes to delivering cheaper EVs, with de Meo citing the €40,000 (£35,000) starting price of the Scenic, which undercuts rivals such as the Tesla Model Y and Volkswagen ID 4.
The second-generation versions of the Scenic and Mégane will sit in the €24,000-€34,000 price range, a zone that delivers the largest volumes for the compact segment in Europe, the company promised.
The retro-styled Renault 5, meanwhile, is targeted at €25,000 (just under £22,000), “matching what many European customers are paying for hybrid cars today”, de Meo said. A range of up to 249 miles (400km) was promised and technology includes vehicle-to-grid capability.
Cost reductions will come across the board. For example, the Renault 5 has been engineered with 20% fewer parts than the Mégane E-Tech.
Of the cost reduction to reach ICE price parity, much comes from the battery, which is forecast to drop 50% from the cost of batteries in today’s ‘gen-one’ cars, including the Mégane E-Tech. Renault admits much of this hard work will be generated by suppliers and de Meo actually pitched the company’s decision not to invest in its own battery plants as a benefit to Ampere as part of its low capital expenditure philosophy.
The pivot to cheaper LFP (lithium-iron-phosphate) batteries is part of that, with de Meo citing their much improved energy density as a reason that persuaded the company from being quite so wedded to costlier but traditionally longer-range NMC (nickel-manganese-cobalt) batteries thanks to its long relationship with Korea’s LG.
Renault is also keen to shift to smaller packs. “It doesn’t make a lot of sense to put in a lot of batteries because first it’s an ecological disaster. I’m not going to put a 200kWh battery on a pick-up truck,” de Meo said, taking a covert pop at rival Stellantis and its forthcoming electric Ram truck.
The battery pack of the Twingo (pictured below), for example, will be below 50kWh, with de Meo citing evidence of low-speed, low-mileage usage from drivers of Dacia’s Spring electric city car – on average, daily average was 19 miles, with average speeds of just 16mph.
Cost reduction will also come from the powertrain, platform (down 25% in expenditure) and upper-body engineering. Manufacturing is another lever, with costs reducing by 50% thanks to a promised improvement of build time to nine hours per car. Renault told investors that Ampere’s ElectriCity production complex in France will be as competitive as plants in Eastern Europe by 2025.
Another big part of the cost-saving comes from development of the software-defined vehicle (SDV), which replaces multiple chips across the car’s electronic network with a handful of much more powerful chips from the likes of Qualcomm (which is considering investing in Ampere). The first SDV is the FlexEVan commercial vehicle arriving in 2026, de Meo said
Car companies from Renault to Stellantis to Volkswagen have all talked about the benefits of connecting multiple features in the car to the cloud, including the ability to update the car and harvest revenue from downloadable extras.
Renault highlighted multiple ways the company could capture this revenue, of which predictive maintenance was one of the biggest pools. De Meo also highlighted a potential aftersales boost. “Today, we probably lose 50-60% of customers when the warranty expires. This will keep the car in the system for 15 years,” he said.
Car companies of course have struggled to convert bold claims of software brilliance into reality, while being reluctant to turn the whole show over to a supplier, who then might capture much of the revenue. Renault claimed to be treading the right path there. “We strike the right balance, neither doing everything by ourselves nor delegating completely,” de Meo said. Get it right and the flexibility of this new software-defined platform would mean Renault could develop cars at a speed “on a par with Tesla and matching the Chinese brands”.
Analysts have been cautious about the wisdom of Renault’s decision to spin off Ampere, which, they say, risks diluting the value of the Renault Group itself. De Meo pointed out that Renault still possesses many profitable divisions, including Dacia, and even pitched support of Ampere almost as a patriotic duty in the cause of backing Europe against the might of the Chinese and other players.
“This is a strong, clever, inclusive counter-proposal of the European industry to the challenges of sustainable mobility,” he said. “This thing is unique in Europe and Europe actually needs people like us to push those kinds of projects.”
