Renault SA (RNO) Earnings Call Transcript & Summary

Yes, good afternoon or good morning, everyone, and thank you for being with us for this call. I'm with Luca de Meo, our CEO. Before leaving the mic to Luca, a few remarks about this call. We proposed to split the time in 3 parts: First, Luca will share his assessment of the company and his top priorities. Then we will have a Q&A session. Finally, Luca will be interested to listen to your views and expectations for the future of the company. I propose to keep about 15 minutes for this last part. Last but not least, I remind you that the goal of this call is by no means to give you an update on the financial performance of the company nor a review of the strategic plan to be presented later. It is about having an informal chat with Luca and Clotilde to give you the opportunity to know him better and vice versa. Luca, the mic is yours.

So good morning, good afternoon, everybody. It's a pleasure for me to be here. Some of you, I know, I had the pleasure to meet before. Some of you, I will be, let's say, happy to meet live maybe in the next few months when the COVID will be over, hopefully. Thierry asked me to make -- start by a personal introduction of my career. So just give me a couple of minutes to tell you who I am, what I've done before. I started actually here in Renault in 1992. So it's kind of a back-to-the-future move for me. Like, this is the closing of a circle. And I've been in the last 27, 28 years sticking, if you want, to this industry. Maybe I'm a little bit crazy or masochistic, but I've always wanted to work for this industry. So I -- after Renault when I started in the sales and marketing side, I went to Toyota Europe and a little bit also in Japan to work on product planning for Toyota and Lexus then, after, went back to my country. I'm Italian, so I want to do Fiat Group in a very difficult time. I found myself, I don't know actually how, heading the Lancia brand that everybody was trying to close at that time. Then Sergio Marchione came in 2004. He gave me the responsibility of the Fiat brand. So I was there at the time of the, let's say, first turnaround of the company up to the launch of the Fiat 500, then he gave me the responsibility of the Alfa Romeo brand. He actually didn't believe too much into the thing, so I had to go to Volkswagen. I was head of marketing of the Volkswagen Group for 3 years and, as possible, trying to get acquainted to Niedersachsen in German. So then it went pretty well. And then they sent me to Audi. I was on the Board of Audi as a sales and marketing boss and then the last 5 years at SEAT, where it was kind of a good time not only because Barcelona is a nice city and sunny and the beach and everything, but we actually had a very interesting experience on turning around SEAT that was considered at the time in the group like a little bit of a lost case. And -- yes, but they had a lot of fun. So I decided to come back to Renault because Jean-Dominique asked me to do that. So I have -- chemistry worked pretty well. And also, I had the feeling that I had to give back a little bit of my experience to the company that gave me the first chance at the beginning of my career because I wanted to work in this industry and I wanted to have an international career, and this was Renault that allowed me to do that. So this is for a very short summary of my story. I'm now, let's say, net probably 100 days, the famous classic 100 days in the company. So I think it's the right time to make a first resume of my impressions. These were a very, very intense 100 days with the team. I actually enjoyed a lot. And I have to say that, in fact, we know that the situation is complicated, I don't know, very complicated. But one of the things that I realized is that the culture in a way, and I'm meaning that in a positive sense, is kind of more or less the same that I've experienced 25 years ago. So you clearly see that an organization like this has a very, very strong culture. And it stays despite up and downs, despite change of management, et cetera. The only thing which is fundamentally difference -- different is the fact that because of the Alliance -- because of what -- all of what happened in the last 25 years, it became much more international. That means very, concretely speaking, if you enter into a room and you have, let's say, 10 people in the room and there is one who doesn't speak French, people automatically turn to English. And I think it's a very, very good thing. So the spirit is there. This is a very creative company. The creativity is still there. People are obviously -- and I will talk about that later, but actually pretty flexible. I said that we are a creative company. I think that creativity is still there. I mean this company invented a lot of things. We invented the hatchback in Europe. We invented the MPVs. We were the first one to -- or at least at the same time of Tesla, introducing electric cars. That kind of creative spirit is clearly there. And what is -- was also for me very reassuring is that, here, nobody wants to be in the position where we are, at the bottom of the ranking. So everybody is more than willing to do everything that is needed to get out of the hole, okay? So I had the feeling that people were following me for -- were helping me and wanted to support me. So I really didn't have the feeling of, let's say, a lot of resistance to new messages, new ideas, new projects, which will give us, for sure, speed. And I think that, very quickly, we'll do a very, very strong team, okay, because we share the same objective. I kind of structured my introduction by looking at strengths and weaknesses sort of thing. I'm going to be pretty blunt about the things. So this is a little bit of my style. But I will start from strengths because, at least, we're getting a little bit better good mood. So I think, for sure, as I mentioned before, a lot of competence, a lot of experience, a lot of projects that -- and this, I can compare also with my previous employees. I think that the level of sophistication of the thinking and the approach to some of the projects and the kind of topics that are on the table are pretty much at the high level, okay? So this is not like old-fashioned organization that doesn't understand what modernity is, what are the things that are priority in the view. They understand very, very well. Now it doesn't mean that all the time we are able to turn that into a reality. That's the job we need to do in the next months and years. But people are on the right vibes and on the right waves, very clearly, okay? I was actually surprised by 2 things from -- as I'm a product guy, by 2 things that were much better than I expected: one is the position of Renault on EVs and the other one on the hybrid and plug-in hybrids. So on the EVs, it's clear that and sometimes we tend to forget that we started very early. I think that, at a certain point in time, there was a hesitation that allowed some of the competitors to catch up and reinvest on EV while we were still wondering what to do. But because of that very early entry into the thing, I think we have a lot of experience. Our dealers know how to sell an EV car. They know how to install a charging point. We know how the technology works. We have already the first returns of battery, so we know what's left in there, et cetera, et cetera, okay? So we don't have to forget that, today, in this very moment, we are a leader of EV in Europe, okay, in volumes, of course, not in turnover because the Teslas are bigger cars, or I haven't made the calculation. But the ZOE is the second most sold EV car in the world after the Tesla Model 3. We have a pretty complete or pretty wide range of offers. We're talking about 8 models that are pure electric car from small city cars like the Twizy to commercial vehicles. We will obviously continue to push on that. Last week, we had a presentation of a couple of interesting products. One is the Dacia Spring, which will be the most affordable electric car on the market. It's a very simple proposition. So you want to buy the most affordable electric car, you go for a Dacia. And the other one is the, let's say -- what we call the Megane with the E -- with the golden E at the end. And let's say, the platform that underpins this car, in my view, is one of the best things I've seen, okay? So I compare technically, the performance, the cost the packaging, the flexibility of this platform. And I clearly see that Renault has an answer, for example, to the ID. program of Volkswagen, very clearly. Now we're going to discuss maybe later -- not today, but later about this thing. But I can guarantee you that this platform has nothing to envy from what I've seen back in Spain or, let's say, in Germany, okay? And we -- there is a clear commitment from the company that we will go for electrification. In fact, by 2022, all models will have either pure electric or an electrified -- or hybridized version of the thing, which, let's say, puts us, in this respect, in a good position. That's why we're confident that we'll do CAFE this year. There's no reason why we shouldn't do the same in 2021. And when I look at the -- let's say, the projection, the numbers, I also think we have a fair chance of passing through the 2025 tollgate, okay? I mentioned hybrid. That was the second big surprise in the house. Basically -- and I don't want to get too technical, but basically, I believe that driving the cars, looking at the performance, comparing with some of the competitors, I think we have probably the most adapted hybrid technology for European usage. I'm talking about Europe. I don't mention that this will be the same story in the U.S. or in Japan. But anyway, we are not there. But for Europe, that's probably the best hybrid technology in the market right now. And for real customer usage, I have done personally -- of course, being very, very careful and driving very, very, let's say, ecofriendly, I did 2.4 liters for 100 kilometers on the car. We homologate the car for 4.1. You can easily do 3.5, 3.6. So there is a clear customer advantage. But the good thing about the story is that the hybrid and plug-in hybrid are pretty much of a modular concept. That means you make a plug-in hybrid out of the hybrid without changing anything else than the battery. So the battery becomes bigger and you get a plug-in hybrid. And the engine has no gearbox, which means that you don't have the cost of the gearbox. And I can tell you -- I cannot reveal the numbers, but I can tell you that this puts us in a situation of having a cost-competitive offer to the leader of the market. You know who I'm talking about. So that means that in this small house with all this problem, we have 2 pearls that are basically an answer to the leader in the -- or the potential leader on the EV market in Europe and an answer -- a very strong answer to the leader of hybrid. The third thing which I consider being a clear asset is the whole story of Dacia, looking at the thing from the inside. Now I'm going to say one thing that probably Thierry would -- but Dacia is basically on the double digit, okay? Yes, this is the reality. And it is impressive to see that -- what kind of level of cost and competitiveness, also from a technical point of view, we have with that platform, okay, that underpins a lot of cars, both from the Renault -- Dacia and the Renault brand. So I clearly see -- and I went to Romania. I looked at the engineering and the design and the production. I clearly saw the possibility of creating a full-fledged global brand, so giving the freedom to Dacia to develop as a brand and not a sub-brand of Renault and making money, okay? So it has been a success so far. I think we sold something like almost 7 million cars in 45, 50 countries. We have already a couple of models in the history that are beyond the threshold of 2 million cars sold, namely the Logan and the Duster. So it's a good story. We can comment about that later, but this is something that was, let's say, surprisingly good for me. Everybody knows that we are good at small cars. Basically, with the IC, so the combustion engine models, we are doing something like 1.2 million, 1.3 million cars last year. This year will be a little bit less. So there are 4 models in the range. That means that each one -- and maybe you can retain those figures also for your reference. For each one, we're doing more than 300,000 cars in average. Normally, in the automotive business, you start to make money with a model at 150,000, new platform at 300,000, maybe localized in 1 plant with a couple of derivatives and the derivative at 50,000. So as I mentioned before, with 1 model, above the 150,000, you start to make money. And we are here at more than 300,000. So you also understand that the projects of our -- on the B segment side are pretty profitable, okay? Other good thing is the old story of RCI. I was pleasantly surprised by 2 things: the strength of the operation, the fact that the RCI team and the rest of the Renault team are very much integrated, which is also pretty good because it gives us, really, a lot of opportunity to work together on new products, new services. And we work hand-in-hand, which is not the case everywhere or at least in other OEMs. And you see some of the numbers, and it's -- you clearly see that when we work with RCI, we are talking about penetration rate from -- that go from 40%, 50%, 60% depending on the country. So we are at a very high level. But when a car is financed through RCI, we have very strong upselling potential. So we're talking about more than EUR 500, EUR 600 a car on top of the average. You see a loyalty-related increase by 8%, 10%. And you actually shorten by at least 2 years the repurchasing cycle, which shows you how important is for us to keep increasing the -- let's say, the complicity and the synergies between the work that is done on the RCI side and the work that is done on the plant side. Last point for me, the Alliance. Obviously, there are a lot of questions, let's say, coming from the outside also because of the last 2 years. I personally see the Alliance as a clear asset. I always say that I believe that in case -- in the case that the 2 companies would split, I think we will both go in the second division of automotive. So the last thing I want to do is actually work to fight the Alliance, on the contrary. So I think I'm a pretty simple and pragmatic guy, so my approach is that I think we should avoid talking about governance and politics and maybe work on some concrete projects that will allow us to rebuild the trust and to actually prove to each other that it's beneficial to work together. And we have a lot of opportunity. The platform -- the electric -- what we call the CMF-EV platform, so the midsized pure battery electric platform, is one good example. It was a very strong cooperation between French and Japanese engineers. We are working on things like modernization of batteries. We are working on pooling on CAFE credits. And we are trying very pragmatically to find 5, 6, 7 projects where we can demonstrate to each other that, as I said at the beginning, it's beneficial to work together and we can really take an advantage. It is very clear that the most important thing that, let's say, has happened so far is the creation of what we call the APO. That means the common platform for purchasing. That is bringing obviously big synergies. And we are now in the process together with [ the Board ] to move from the purchasing side to get into the common engineering of some of the things. That's why I mentioned this what I call magic projects that are really related to the idea that some of the things, we can do together, components, platform, electronic architectures, software, et cetera, et cetera. Now that's for the good side. From the bad side, let's say, obviously, there are also many things. I would start from the -- let's say, from the kind of feelings and attitude that I found within the team. So I really had the feeling sometimes in some meetings or meeting some people that the team had lost confidence. Of course, this last 2, 3 years were not easy for anybody, okay, because of results and because of other issues. So my first priority was to give people the hope that we could make it. And we very quickly, let's say, kind of compiled a story. You have probably heard that [ since it's also into the press ] that we call Renaulution, or Renaulution in French, that gives a little bit of a path or where we want to go, how we can get out of this thing. And I believe that people -- let's say, I feel that the people believe in that story because it's a very concrete story. You will hear that in January, max. And it's a story that is feasible and is a story that is very consistent with the spirit, the culture, the competence, the capability of this organization. It's not something that is kind of copied from some other places. It's very Renault in a way. So I have the feeling that the people are believing to that, and we are working like hell, night and day, to make it happen. And I have to say that up here from the first of July, I don't know if I'm lucky but -- because with the COVID and all this thing, I can't say that I'm really lucky, but I have to say that in the call from Clotilde and Catherine -- Clotilde and Thierry last Friday confirmed that July, August and September were not so bad. So we are looking at results that are encouraging. And especially when you look at the jump we made on pricing, it shows that we are getting a little bit more disciplined on the thing and, more importantly, that when I came here, I immediately pushed for creating value, margins, et cetera, et cetera, and the organization is reacting. So this kind of effect on price is just a change of rules of engagement into the game. So lack of self-confidence of the people, which we need to turn, and some of the success hopefully will help us getting more bullish on many of the things and quicker. The clear thing that I saw is the full orientation of the old system of the operational system of the organization towards volume. So basically, when you read the strategies like drive the future, the first [ chart ] is about doing -- and there is no judgment from me on the merit on the quality of the thing. I'm just saying the facts, okay? So I don't want to criticize anybody, but that's not the kind of game I like to play. What I like to play is to create value. I've done that at SEAT. I've done that at Audi. I've done that at Volkswagen, at Fiat. So that's -- you have different kind of trainers. You have defensive and offensive. I'm kind of an offensive trainer. I'm here to create value. But it's clear for me, when I look at the organization, that the old thing was driven by volumes, okay? So there was a target of doing 5 million cars by 2022. We never did more than 3.8 million. This was in 2019, okay? So -- and I have to change that. So this is the thing that we are obviously working. Maybe -- and Clotilde can confirm to you because she is more, let's say, into -- she's been here for a while. And so she's seen that. I think there is kind of a lack of financial culture. So it's the story of volume versus profit. We had a growth of fixed cost that was bigger than the growth of turnover. We have obviously insufficient free cash flow, which we need to fix. I think we have, right now, a clear plan, which we will detail later, that benchmarks the PSA group in the way they rebuild their pricing position. And especially, they pushed average transaction price up, which in my opinion is the key to enable us to create margin and then cash flow. So we are preparing, for example, even if I don't want to anticipate the story of the plan, in the first 6 weeks, I think I completely changed and we did altogether the product planning of Renault by killing 7, 8 projects that were on segments and in markets where we couldn't -- we think we cannot generate margin to -- and we reinvented 5 or 6 of them in segments and for markets where we think we can make money. And you will see in the plan a very credible, let's say, strategy to increase average transaction price of -- especially both of Renault and I would say also of Dacia. And that brings me to another point, which is when you look at history, the -- it is the lack of investment discipline. So in fact, in 2017, the commitment was to stay below the 9% R&D CapEx to turnover. In 2019, we were like 10.7%, almost 11%. In 2020, because of the decrease of the thing, we are closer to the 12% or 11.5%. So what can I say on that one is it's -- this is also based on the fact that the way the things were decided, they were probably decided more on operational margin things. So -- and the decision were made region-by-region or market by market instead of looking at that, for example, program by program. So this thing will change. So the driver will be the return on investment -- the return on capital, very clearly, okay? And we are -- all the projects that we have decided are actually based on that. They will continue to be like this. I have also to say that the arrival of Gilles in the engineering side is giving us a really, let's say, strong, let's say, backwind because Gilles is a very frugal and very, let's say, investment-oriented and cost-oriented engineer, so which he basically did the whole thing at PSA. So he is putting in place a plan where we see reduction -- we have a visibility of reduction of cost of investment, et cetera, by about 20%, 25%. So -- and this thing is completely real, okay? It's not a PowerPoint. That's -- so I think we will be able to -- hopefully to convince you that, on the investment discipline side, we'll be much more rigorous in the future. I also feel that from a, let's say, product point of -- product planning point of view, product strategy point of view, there was sometimes a disconnection between what the engineers, the technician and the product people want and what the market wants. So if there is something that I think I'm good at doing -- there are many things I'm not good at, but if there is something that I'm good at, it's to understand what the customer wants, okay? And when -- I remember, when I first sat into a new Captur -- so they sent me -- they borrowed me a prototype of the Captur with a plug-in hybrid. I look at the thing inside and the technology, et cetera. I mean it's -- this thing was better equipped than an Audi of the -- let's say, of the upper segment, okay? It was a Christmas tree, okay? Now the question is, why do you have to put that kind of [ conduct ]? Are you sure that the Renault customer will pay for that? Okay. So there is a lot of work that we need to do to center our offer and our content to the -- to our target customer in the segments that we sell. So -- but this is an example. There are many things where you ask yourself, why the hell the money was put on that technology and not the other technology, where there is no, in my opinion, big value for the customer, especially for a brand like Renault or for Dacia? There was a lot of complexity. So I see a lot of complexity in the range. We will reduce that by 30%. It's already on its way. We had, I don't know, 9 specific model for Russia, 4 specific model for Brazil. I mean you know that this market, they can go well, but sometimes, they can also go pretty bad. So you need to know -- I don't know. You look at a car like the Clio in Italy, if I remember correctly, I don't know, or the Captur, I don't remember. Captur in Italy is like 220 million possible combination. Do you need that? I mean it's just like -- it's kind of nonsense. So we are cleaning up this thing. And I think that the reduction of diversity will make our work easier, the work of the engineers easier and also of the commercial people. So the other thing is the lack of pricing power for Renault brand. I think that the issue is the Renault brand is the Renault brand in Europe because we treated the brand really -- let's say, we pushed the volume in the thing. But as I said a few minutes ago, this thing can be corrected. It's a question of management priorities. And the good improvement on pricing we had in the third quarter, I think we jumped like 5.5 points compared to 2 points in -- 2.2 in H1. I think it shows that if you treated the topic properly and structurally, I think you can relatively quickly change things, change the trend, and that's what we're doing. The other thing which is clear for me in terms of weakness is the -- let's say, is the lack of power competitiveness that we have into the C segment. And here, I'm going to spend a couple of minutes to give you a couple of figures. So there are -- we sell -- out of the total mix, there are only 17% of the cars that are in the C segment for Renault, which should probably be at the double, probably should be at 30% to be in line with the benchmark. But if you look at the segment like profit pools and you compare C segment and B segment, so the small cars, actually, the C segment worldwide is 4x as big as a profit pool, not in volume, than the B segment. And there, you understand all the problem. So the key problem strategic for Renault in terms of product offer is the fact that we need to recover -- reconquer the, let's say, the C segment. This is what we're going to do in the future. So this is a little bit of, let's say, a resume of the thing. I will maybe pinpoint some of the priorities for the future if it's okay for you, very quickly, okay? So we have to change the company culture, and we're doing that. We need to push on financial discipline and investment discipline. We have to optimize the top line through a complete rework of the lineup, betting on bigger cars, EVs, et cetera, et cetera, and more competitive car. And then we are changing the organization. You've probably heard in the press that -- and maybe this would be an object of, let's say, some of the questions in the Q&A. We are turning the organization from regions to brands because I believe that this is much more effective and will bring us -- will bring more focus to the outside, to competition to the market and to the margin. As Thierry is stopping me to -- so I shut up now, and I leave it to your Q&A. And then I will be really pleased to have at the end of your feedback, some advices for the future because we are eager to learn from looking from people that see us from the outside.

Thank you very much, Luca, for this comprehensive presentation. And now we'll open the Q&A session. So who want to start?

[Operator Instructions] The first question comes from Thomas Besson from Kepler Cheuvreux.

I have 2 quick questions, please, first one on Dacia and Renault. Without giving us any hint of what you're going to say in January, can you clarify maybe what you want to do if you globalize Dacia? I mean, for the time being, you're using Dacia products under the Renault brand. So is the idea to rebadge the current Renault products that have a Dacia, let's say, [ real products ]? What do you mean in terms of differentiation between these 2 brands? And do you really want to bring Dacia closer to Citroen? Or is that something that -- where you were misquoted? That's the first question. And the second, you mentioned RCI as one of the key assets, and I fully agree with you. Can you explain to us how much is it going to be a priority for you to keep the control of these assets given the financial and credit situation of Renault? Are you going to be ready eventually to sell assets to preserve the credit rating? Or are you eventually going to be ready to do what SEAT or Peugeot have done, which is give up the control and put it in a JV.

Okay. So on the first one, for me, the answer is very simple. The thing is, it makes sense to give a chance to Dacia to develop upwards in terms of segments and also wider in terms of market. For the second case, it is obvious that it makes sense to widen the scope of Dacia in the moment in that specific market you have space under Renault, okay? So we will need to reposition Renault upwards, okay, to give space for Dacia underneath. This thing will not happen like this in a minute, right? It will take years, maybe a generation of products, okay, before we readjust this thing. This is something that should have been done many, many years ago. And the problem that the -- let's say, it was pretty comfortable for a lot of people to actually invade at the entry level the global market with very cheap and, let's say, and affordable cars with the Renault badge. But we didn't make the jump because one of the things for strong brands that is important is that you have a consistent positioning relatively to the local competition everywhere. So Renault is not an access brand in the market. It's a brand that needs to be in the middle of the market. Dacia is an access brand. So we will do -- we will go through this process. We will try to bring up Renault, and we will leave space to Dacia, but we will also leave -- give the possibility to the Dacia to go a little bit upwards and without having that kind of glass ceiling on their heads that limits their potential both commercially but also financially. I can't -- I think -- let me maybe clarify specifically the, let's say, our position on, let's say, on the meeting we will have on the plan because we will show you very, very concrete things because the work is already ongoing, and we have a clear path to answer to your question. On the second thing, I will do -- maybe I'll leave also Clotilde to comment on that because she's -- as the Chairman of RCI, she also has the credibility and legitimacy to say. What I can tell you is only one thing, is that in a phase like this, we recognize all the challenges that the organization has. So we have no religion. We will try always to do the things that is right to get Renault out of the difficult situation we are in. But it's -- so we are completely open, but we also are not in the position to accept any condition to our strategy. This is in general, okay? So I'll leave it to Clotilde because she is very close to this issue.

Yes. Thank you, Luca. On RCI, obviously, for us, it's a very important asset. And we're doing everything we can in order to make sure that we can keep the control because -- obviously, we can leave with -- like our competitors are doing. But I don't think it's the right thing to do for the company in view of what the asset represents. So what we're doing is, indeed, to diversify our financing means in RCI in order to be able -- if there was a rating issue, to be able to go through this period. So this is basically what we're doing. We're diversifying. As you may know, we have now a very big amount of savings that is helping RCI. We're doing new ways of financing in order to be able to fully leverage RCI as we are doing today. As Luca has mentioned, it is improving upselling, it is improving the speed at which people are renewing their cars. So that is basically the strategy. Now, never say never, as Luca said, if there needs to be asset sale in order to protect RCI or vice versa, we will do whatever is good for the company.

There is one thing that Clotilde didn't mention maybe because she's too modest. But one of the big things we're doing around RCI is the creation of the fourth brand of the group, which we call Mobilize or Mobilize in French. And unofficially, I can tell you that Clotilde will be in charge. And a little bit à la Daimler, okay, our idea is to build around the bank and to federate around the bank a series of business that are related to the new value chain and the new mobility world, okay? So the offer of RCI will kind of widen because they will get into fields and businesses where they were not in before, okay? Why we did that, I think it's, let's say, pretty obvious because they have a very direct contact with consumer, because they know how to get them paying and because also they could potentially efficiently finance the assets not to impact the operational side. But what I've seen in Renault is tons of different initiatives, left and right, someone with a small ambition, the other with a bigger ambition, not big consistency. So we are putting that under one umbrella. And in general, we will present to you a strategy which I think will be, in this case, pretty Renaulutionary, okay? If I can say it like this, it's pretty Renaulutionary. One of the things I can anticipate is that the difference between the approach of some of the competitors when it comes to new mobility business and ours is that we will plug in a technical and engineering team in this organization to develop purpose-designed vehicles for mobility platform, which in my opinion is the key, okay, to solve the, let's say, economical case of many a mobility platform. So I'll stop it here because I see that Thierry is becoming very impatient.

Yes. Please, for a question of time constraint, I will ask you to have only one question for Luca and not several. Thank you.

Next question comes from George Galliers from Goldman Sachs.

And thank you for holding this very helpful session. I really just had a question on kind of complexity and coming back to some of the points you made. So the car company with the highest valuation in the capital markets is selling 4 products with 1 type of powertrain in a handful of markets. You presently have over 25 models, participate in over 130 markets and obviously have multiple powertrains. It sounds as if reducing complexity is a major target, and you mentioned 30%. You also highlighted Renault's leadership in electrification and your strong hybrid offering. So the question really is, what constrains you from pursuing a more aggressive strategy in terms of reducing the complexity of your product offering and effectively positioning Renault as a pure-play on the future in only the most attractive geographic markets for the group?

So actually, nothing prevents us doing that, and we are kind of maturing the idea that we need to focus, basically. And when it comes to platform reduction, you will see a much more substantial, let's say, decrease of the numbers. When I'm talking about, let's say, diversity, complex is more into equipment, range, components, duplication, et cetera. This is -- for us, this is -- the 30% is the minimal thing. But in some of the key structural technology, we will go much deeper than that, okay? So let me, let's say, have the presentation on the plan. I will be more precise. But I can tell you, I think that I saw clearly the advantages that Renault has in some of the technologies. Hybrid and electric, namely, will give us the possibility to potentially go quicker than many others that have a lot of legacy on the new segments and on the new businesses. This is at the heart of the Renaulution plan.

Next question comes from José Asumendi from JPMorgan.

Very, very valuable and very interesting insights into your first 100 days. Look, one question only. It's going to be difficult. But if I could ask just one, I guess you're trying to do this exercise of realigning a little bit production capacity with the demand out there in Europe. And obviously, COVID has been an opportunity also to realign the output and improve the pricing power. I'm just trying to understand, and without preempting too much into the January meetings, how do you see the possibility to reduce capacity into the year-end, potentially some asset write-downs? Is this something that you could consider and then use this opportunity by year-end to really reduce capacity, which I think ultimately will allow you then to benchmark your metrics against some of your peers and hit those [ famous ] labor cost or CapEx R&D targets?

No. I think that -- I think we'll have the -- let's say, we'll have the chance to do this. This will be -- obviously, we will be detailing that during the plan. But one of the benefit of choosing a reference is that you see much more clearly where you need to go, and it gives you a lot of simplicity in defining your approach. And you know who I'm talking about, and you know what they have done, okay? So we're not reinventing the wheel on this thing. We understand exactly what our starting point is. We know our strengths and our weaknesses. I can tell you that we were going to do the job and -- but also, I can tell you one thing, which I didn't mention as part of the, let's say, strengths of Renault, which is the fact that 2/3 of the volumes in Renault, they come from places, plants, where the labor cost and the transformation cost of the cars is much lower than the European average, okay? So this is also one kind of, let's say, side effect of the strong push of Renault for globalization in the last 15 years, okay? So when you look at the numbers, I can tell you, José, we're not so bad in some of the things, okay? And we'll try to explain that. But of course, there is a lot of work that needs to be done to realign the industrial footprint, and there are some decisions that we need to make, but we have them very, very clear. And we have a plan, and we will present it to you in January. So it's very clear to us.

Next question comes from Philippe Houchois from Jefferies.

My single question, following Thierry's instructions, is on China. I think, Luca, you have said at some point, and correct me if I'm wrong, but that it was difficult to impossible to think of a strategy in autos today without including China. And could you provide some context to this and your view whether Renault still has a chance to participate in the Chinese market? Or is it something that is not part of the strategy today?

That's an interesting -- a very interesting question. I like it very much. It will probably require 1.5 hours only on this one. But let me tell you something. I kind of stated and repeat that a company that sees itself as a global company without a presence in China one day is like a table with 2 legs, okay? So it is clear that we have to imagine a future where China will play a role. We also have to say that, as we are part of the Alliance, the ones that are really engaged into the Chinese market is Nissan. They're selling more than 1 million cars. So in the family, there's someone taking care of the thing, okay? The other thing is that we have a few things left, and we're trying to reinvent to protect what we have, so engineering capability, a joint venture for commercial vehicle, a joint with -- a company that is doing electric cars, et cetera. So we are trying to make sure that we use those assets that we have there to -- and seeing China as the forefront, the avant-garde of the automobile and to try to do things for China that are pretty advanced and are not the classical car, because we failed miserably with the very traditional, let's say, approach to the market, combustion engine cars, SUVs, et cetera. We didn't have the size, the -- I don't know, the guts, the balls, the money to do that, okay? So for the time being, we are into that kind of mood. We are also -- you also have to know that we have -- we continue our cooperation with Dongfeng on the production of the Spring from Dacia. We made a decision not to localize the Spring somewhere else with Clotilde and the team. And I am sure that this thing will be a success because it's a very, very clear proposition. So this might be a very good surprise next -- in the next couple of years and also maybe a good precedence to reconnect and to rebuild a positive and constructive dialogue with our partners and the ecosystem there, okay? Now if you ask me, I think China right now is certainly not my priority because we have other things to fix. But I dream of one day potentially reentering China, not immediately. But if we go, then you have to jump directly to the 6G. You understand what I mean. So we need to imagine China as a very advanced market. Because we will be a in very advanced market, and this time, we're not going to come behind the music. We're going to try to tune -- to go quicker than the music. That's what I can say today.

Our next question comes from Harald Hendrikse from Morgan Stanley.

Harald from Morgan Stanley. Just the one, Luca -- sorry, the one that's on most investors' minds, and I'm sure it's something that's occupying your mind, too. Lots of good assets in Renault but not a huge amount of cash right now. Do you have sufficient cash to do all of the good things that you're planning, the technology revolution, the product revolution, everything that you've been talking about? And what are your thoughts about being able to bring back cash generation? Because as you highlighted earlier, cash probably follows EBIT, and it's not going to be super easy immediately in 12, 18 months to turn that around very quickly. So can you maybe talk about that a little bit? It seems to be the biggest concern that investors still have.

Look, I think that there are 2, let's say, mantras in the house right now for the first phase. This is -- obviously, it's margin and cash. So we are looking every single day at what's going on. I can tell you that, of course, the situation is not easy. And then I'd like also maybe, Clotilde, who is very close to the issues in this every day, basically. But on the product side, because we have stopped doing things that didn't make a lot of sense from -- in terms of return on investment and we concentrated on fewer things but better done, okay, I think we can make it. So at least, this is our estimation on the product side, okay? On the product development side. So our -- let's say, there were so many things. I mean we were developing like something like 36 new products. So you cut 30% of them, you put them on the right thing, I can tell you that we might find a way to -- or maybe you use things that are already developed because it's an Alliance thing, et cetera, et cetera. So we have been very, very frugal and focused on the way we built the new range of products. And that range of products will definitely, and you will see, have a huge impact on our ability to generate cash and EBIT, et cetera. That's for sure, okay, because there was a lot of room for optimization, let's put it like this. So -- but as you know, as you correctly say, the real effect of this product might come in maybe 2.5, 3 years' time because we started now. So in the meantime, we have to work to be very disciplined in the way we do pricing and the way we manage the cash, et cetera, et cetera. And then I'll leave it to Clotilde. She's already smiling, so it means that she has...

No, that's exactly -- we know it's a tough period. It's a tough period for everybody. And I can tell you with the arrival of Luca and Gilles Le Borgne and what we had launched also with the 2o22 plan, we have a very strong focus on discipline and in terms of cash generation. So obviously, what we will present to you is a plan that works because we're not going to present to you something where we spend a lot of money and we don't get the return. So that is what we're working on. As we mentioned already before when answering Thomas' questions, if there needs to be some asset sale, we'll do some asset sale to do some of the financing or reimbursement. But we are working on the plan that works, i.e., we have the discipline to lower our consumption of cash, the discipline to increase the revenues in order to help us go fill the time where these new cars would -- new beautiful cars are going to be in the street. So this is basically the way we're approaching this new plan.

Maybe I can add one thing, Thierry, if you allow me. Allow me 10 seconds, please. We will go longer, but -- of course, every situation is different, okay? But I will mention the example of my previous experience with SEAT, okay? That company was at, what, minus 7%, minus 8%, minus 11%, okay? In 4 years, with the right introduction of products -- maybe not full because we didn't have a lot of money. We moved from minus 7% to 4%, okay? And we increased the average transaction price by 30%, okay? So what I want to say is, at least, we understand how the things have to be done, okay? We know how to do it, okay? Every situation is different, starting point is different, complex is different, et cetera. But on how to do it, I can tell you, my friend, I know exactly what has to be done, okay? And I think we all share now the same understanding in the team.

So as we are already at the end of the time. I suggest that those who are still in the question list -- waiting list, sorry, would give some feedbacks to Luca because I promised him that he would get some feedback from you. And we have very little time for that now. So those who are still on the waiting list for the Q&A, please give us your assumptions -- your assessment, sorry, about Renault's situation rather than asking a question. Luca, is that one okay with you?

Yes, it's fine. Super fine. Yes.

Thank you, ladies and gentlemen, this concludes the conference call. Thank you all for your participation.

No, sorry. The -- we are not closing the conference call now. We are waiting for having more people in line but, rather than asking questions, just giving to Luca some answer feedbacks.

Answers. Any good advice for me?

Okay. So the first on the list, we have Horst Schneider from Bank of America.

I cannot say thank you for taking my questions because I cannot ask a question anymore. So then just feedback from my side, what I struggle a little bit with is your slogan from volume to value and how I should match that basically with the volume outlook. Because the way we are doing forecast, so we are looking at basically IHS figures. We try to make -- or I try to do that. I try to make, then, up my own view, and I take a discounted premium to the IHS view. So I'm scratching at the moment my head, and I'm thinking what kind of discounts should I take because, ultimately, volume to value means you sell less volumes. So what discount do I have to take? And in that context, I'm always surprised how much you talk about product but how little you talk about cost-cutting, right? So therefore, when you present the plan, what I basically wanted to hear is how you address all the problems short term. So how much more do you need to take down costs, right? And therefore, I also hope that you have got by the plan presentation, hopefully in agreement with the unions, that we can get a firm idea of what's on the agenda basically for 2021. Because when you look at, for example, Peugeot, they didn't have the first few years, really, a model lineup. And they basically just recovered the earnings by cost-cutting. And that's what I missed a little bit in all your statements.

Yes, because I didn't mention precise figures on cost. It makes sense to -- let's say, to mention one thing when I can declare a target in cost reduction, which obviously is part of the plan, both on fixed cost and on variable cost, and it will be part of the thing. So I don't think today was, let's say, the -- if your advice is you need to cut cost, thank you very much. I knew it before. I will tell you then how much in the moment we will -- let's say, we will detail the plan, of course.

No. Look, don't get me wrong. I don't want to give you advice, first of all. And second, you know that you have got to cut costs. I mean we got -- we had just got the cost-cutting plan in, in May, and I just ask myself how much more cost-cutting you have to do. If you shift from volume to value, and you sell less volume, right?

Yes, I mean that's different. So I think that in the plan, I consider the plan that Clotilde presented in May as a base -- starting point and the base in the [ value ] plan. And of course, because of the COVID effect and some of the things, we actually are going to push the envelope even further, okay? And we're getting organized to go even more into the flesh of the thing. So don't worry that -- it can only be, let's say, stronger than what was presented in May. If you want my -- let's say, my feedback. Now on the story of the volume. Normally, I'm a car guy. So I know very well that this is an industry that is very capital-intensive. So volume are an important thing. I'm not telling you that I want to become a Lamborghini. I know that very well. But what we try to do is actually to build a plan that doesn't bet on the volume growth that might not come and might not exist in order to put pressure on the system to reduce the cost, which, by the way, is not very different from what my very good colleague and competitor on the other side did at the beginning, which was building a plant that was not betting on an incredible growth of volume to kind of hide all the things underneath, et cetera, et cetera. So I think it's a very healthy way of building a plan. And of course, if I can -- I'm a sales guy. So if I can sell a car more, I can -- I will do it. Don't worry. But I can't build a plan betting on the growth of the top line because that would be a little bit dangerous, I think.

Next person from Bernstein, Arndt Ellinghorst.

Arndt Ellinghorst from Bernstein. Well, first of all, I wish you good luck because we all want you to be successful.

Thank you. I need it.

Well, look, Luca -- I mean, as you know, it's been a really traumatic journey for investors, especially the last 3 to 4 years with Renault. So we all like you here talking about value creation and pushing all the right buttons in terms of complexity and pricing. And I would agree. We've seen it many times at other players that it's actually possible to turn these businesses around. But my question is -- or observation here is more there are other ways to really deliver value to shareholders. And you have just a completely overproportionate investment in Nissan and in some other players as well. And the money is, in a way, really debt money. I don't think you need a 44% stake in Nissan, for instance, in order to support the Alliance, to drive the synergies, to do whatever you want to do. So my suggestion, and I know you can't comment on it, is really to rebalance the Alliance, to rebalance your shareholder -- your shareholding in Nissan to take the money and do whatever is necessary to do with Renault and not have it lying around. And the Renault core business is valued at whatever billion or so these days. So there's something really fundamentally broken in the valuation of the company. So that would be my recommendation: to really reassess the investment you have in your joint venture partner.

I thank you very much for the advice. Thanks, Arndt.

Next participant, Angus Tweedie from Citigroup.

It's Angus from Citigroup. And Luca, thank you for taking the question -- or the feedback. I guess just sort of echoing what Horst was saying, I mean the feedback I consistently get from investors is trying to get their head around how working capital fits in a strategy where you're going to push pricing and, I suppose, probably see volumes under pressure. How do you think about that dynamic, particularly given the balance sheet constraints? And how much of that's going to slow down your ability to turn around the business?

I mean it's more of a question than an advice. So I mean, of course, it's a different thing to manage the cash through working capital rather than doing margin. I think we have to do, let's say, both things. First, concentrate on our ability to generate margins with the product that we have or that we will have very soon. Think about the fact that by the end of next year, we will be selling a completely new C segment car on a new platform, which was at the beginning of the PSA, let's say, rebound the -- let's say, the -- actually, the kind of a kick-starter of a movement. And so we will have it next year. And then we will have electric cars by the end of 2021. So our battle is really to find a way to get really natural, healthy margin coming out. Now on the inventory side and on the working capital, there is a - you can already see some signs of the new philosophy. I remember when I came in here that I was asking the people to manage completely different the balance between customer orders and stocks, telling them I wanted to have the customer orders always, let's say, above the stock, okay; and to have a balance, let's say, 2 months, 2 months just for -- because I know -- I mean I'm -- as I said, it's not the first time I do these kind of things. I know that this is a magic balance, okay, between how much you have in your order portfolio to deliver the cars in the right time to the consumer, okay, because we are not Porsche or Ferrari; and on the other side, to have a decent level of stock. And I have to tell you that by the end of September, we were probably at 60% order bank higher than 2019. And we are getting to -- closer to the numbers that I mentioned before. So I think that we will have a much healthier management of this for sure because I also know that this is the key to actually create value and manage pricing power. I know that this is one of the key things, and you will be able to look at us from time to time, and we will show you, because that's kind of a, let's say, a good indicator of the health of our, let's say, go-to-market strategy and policy. But I personally believe, and we have a couple of projects in the house, that using -- with a much more focused and less diversified lineup with technology, et cetera, et cetera, we have the potential of dramatically speed up the supply chain. So we have a project, which I think is pretty, again, Renaulutionary to actually lower down inventories in the house. So let us a few weeks -- give us a few weeks to be more specific. We will -- it would be part of the story in the plan. But I assume that a company like Renault probably has EUR 5 billion into the funnel, more or less. And it takes us, in average, 70 to 90 days to deliver a car from order. This thing can go much lower -- much, much lower. I've already done that. But -- and so there is a lot of potential also in the way we master this kind of thing. And we -- but we are very clear about it. So they say -- Thierry says this is the last.

Last. One more.

Last but not least. One more or two?

One more.

Yes. Next participant, Tom Narayan from RBC.

Tom Narayan, RBC. And I appreciate doing this. I'm probably not going to give advice. We move numbers around on spreadsheets. You're actually running a business. But a corollary to George's point before, one argument we hear from investors a lot is why the carmakers in Europe, except for your friends at VW, are pushing plug-in hybrids and hybrids so aggressively when full electrics are seeing so much demand. Charging infrastructure is often cited as the reason, but with most charging happening at the home and I think like -- something like 37% of Western Europe being in single-family, non-city homes and CO2 requirements allowing for a slow and gradual penetration increase in Europe, it would appear that it could be possible to pursue a full electric approach rather than doing these dual and all these different approaches to it. It's just -- that's something that we are hearing a lot of across the industry.

Yes. Look, you know what? When -- let's say, I'm still wondering how Renault could afford to do the same thing, electric and hybrids and plug-in hybrid. This is a strategy for a rich company. Not even Volkswagen could afford to do that. But the investment is done, okay? So what I can do now is just take full advantage of the fact that I have all the possibilities to work on. With Renault, so you can't say that to us because Renault -- or not to me personally, to the company because Renault was one of the first believers in electric cars. And the platform that we presented last week, I can tell you, as I mentioned, compares easily to the one -- to the ID. program or to MEB from VW, okay, in terms of flexibility, in terms of potential where you can stretch the thing, et cetera, et cetera. So I actually have 2 strong cards in my hands. It is clear that this gives us a bit of complexity, yes, also on the commercial offer and on the diversity in plants, et cetera, et cetera. But the money is gone. And don't forget that at least in the next 5 years, and we're looking at the cost of batteries going down but not with Moore's law of computer chips, let's put like this. It's much more profitable to sell a hybrid car than an electric battery vehicle, okay, especially if you don't take into account into the project, the CO2 fine avoidance, which is the logic with which many manufacturers are, let's say, approving electric cars today, okay? So I can tell you that we see very short-term visibility of getting a hybrid car at the same level of profit of what we had with diesel engines. And this is not so easy with electric cars simply because the batteries represent 40% of the cost of the car and they are in the hands of 3, 4 providers that make the market. And 80% of battery cost is in the raw materials that are in -- at least, I'm talking about the pack. And the raw materials, sometimes, you don't control the evolution of the price. So I'm very happy to have a couple of options in my hands as a strong one. Think about that also. Sometimes, monodimensional strategy is not always the best one. It's probably also risky. When you go to the casino, I mean, do you bet everything on one color, one number?

Okay. Thank you very much, Luca, for this presentation and the 15-minute extra times you gave us. And I'm sure that...

No, I like to do that. I could even continue.

I'm sure that you will have many opportunities to have this kind of exchanges with our dear friends from the buy side and sell side. But I think now it's time to close the session. So thank you for being on the call today and speak to you soon. Bye.

Thank you very much.

Thank you.

Thank you very much.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.