Renault SA (RNO) Earnings Call Transcript & Summary

Good morning, and good afternoon. Welcome to this presentation. Renaulution, that's the name we have chosen for our short-, mid- and long-term strategic plan this time. This is one word, which is already part of our organization's lang, able to grasp the degree of transformation we consider necessary, while stating our belief that we will build it with our own style, leveraging the know-how, the assets and the culture of this 122 years old company. We knew we needed a new storyline, which -- with a new direction, a plan with solid and credible numbers. But we also felt that playing a new game would require a profound organizational change, putting our top managers and top leaders in the right positions on the field, giving them and their teams a new set of objectives and motivating them with a different reward system. This is part of what we have done in the last 6 months, and this is what you -- we are going to present to you in the next 90-100 minutes. But if you want me to boil it down to just one simple slogan, it will be moving our focus from volume to value. I took the time to go pretty deep in the system to meet the people, see the problems, the challenges, but also identified the strengths and scouting for opportunities. I visited plants, dealers, design and engineering centers in France, in Romania, in Russia, in Spain, in Turkey, in Morocco. Many different situations and issues, but one common denominator, the entire system was attuned to grow in volumes. Now I would never -- they are saying that the approach was wrong. It might have been appropriate 5, 10 or 15 years ago, but it clearly failed in the recent past. Otherwise, we would not be in the situation we are in today. It is like a car growing in size and weight, becoming too heavy for the output of the engine, and this becomes very obvious when the latest Grand Prix are raced on more and more twisty circuits. Let's start by celebrating the good things that we inherit from the past. 10 years ago, we started amongst the first in the world with electric cars. We have long experience on this value chain. And by the way, just to remind everybody, we are the volume leaders in this segment, at least in Europe. 20 years ago, we engaged and proved that the global low-cost car was possible and sustainable. We have sold over 14 million vehicles in the meantime, everywhere. We have built a double-digit direct cost advantage compared to our competitors, while being profitable. This is very difficult to replicate. Almost 100 years ago, we created our retail finance branch. And now we have a clear over-performer with RCI, sporting best-in-class levels in profitability, resilience and customer satisfaction. And then, of course, for the past 20 years, we have been members of the Alliance, which is one of our key strengths today, not for the scale like everyone keeps repeating to me inside and outside, but for the potential and especially for the reach, the reach in terms of product, ranging from Japanese small kei car to 2-ton pickups. This scope potentially gives the 3 groups the chance to tap into 70% of the global profit pools and virtually any market on the planet. Rich in terms of technology, with the 3 members company engineering teams. This enables us to handle any current and future technology available and relevant in the automotive industry. Rich in terms of business, exchanges of technology and more between Alliance companies generated over EUR 35 billion in the past 4 years. Without forgetting that, every year, our common purchasing platform called APO is processing more than EUR 100 billion worth of trade. On the negative side of the equation, 2 variables: first, the immoderate quest for volume; and second, a nonresolved approach to market and brand portfolio management. The company had one objective you certainly remember: exceed 5 million units sold by 2022, and it's strived to get there. We built a manufacturing capacity fit for this target. We increased our R&D CapEx by 65% in 4 years. And we reached a peak in 2019, only 3.6 million vehicles produced. The result is that our return on capital employed, the ROCE, was lowered by 50% between 2015 and 2019. Our breakeven point grew 15 points above where it should have been before. All of this before the COVID. So we grew bigger, but not better. We also grew wider worldwide, still not better. We targeted volume pools, not profit pools, outside of Europe, mainly in emerging low profile markets and segments. After a decade of expanding our geographies, we sell cars in over 130 countries, but Europe still concentrates 3/4 of our profit. In fact, it may surprise you to learn that 5 European countries generate half of our profit. So expanding to over 100 countries has only brought us 25% of our margin. Expanding globally frequently brings also product diversity and complexity, and it happened to us, too. Almost half of our lineup is made of region-specific models with suboptimal volumes, and we were not particularly disciplined with complexity in product development. So by counting the number of parts entering on average in each single plant independently from the model, we realized that we were 20% above benchmark. Now talking about brand portfolio management, we see -- you see here that we ended up with our 2 main brands, selling cars in the same price ranges. On the right side, you see another symptom of the volume mantra. In Europe, Renault is well positioned in terms of pricing compared with other mainstream players. But when we went global, we looked for the easiest way to gain market share, selling entry-level cars. And my experience says that strong global brands have a homogenous position across the markets. Now let's look at the opportunities that we have. Over 2/3 of our sales are made in the B segment when the C segment profit pool weighs 3x more, and it brings an average of 30% additional operational margin per car. When you compare our operational performance in the last 5 years with our benchmark, half of the difference is here. We lost ground on the C segment in the most traditional European markets. It is as simple as this. I am seeing the C segment as a lost opportunity because we are talking about something we know how to do, in segments where our customers are expecting us to be competitive. We did it back in the '90s, I remember with the Megane family. Only, we have not been able to replicate it since. In conclusion, the diagnostic is pretty cut and dry. Now we know what we have to do, and we have already started doing it as a team in the past 6 months, reduce our breakeven point, reduce unnecessary diversity and complexity, focus our investment on more profitable products, steer our business from market share to margins. This is obviously the first part of the game. Now let's look at how we have organized the work and how we look beyond just fixing the basics. I would like to take the chance to underline that this plan is not just a wish list. It is the sum of actions we have already decided and organized and, for some, already up and running. We have 3 phases within the horizon that looks beyond the classical 5 years of a plan. It goes from simply surviving the storm to putting the company in a better shape it's never been before. First phase is Resurrection, running from 2020 to 2023. It will be clearly about cost reduction, margin and cash generation. We are already totally in this phase. All efforts are focused on restoring our competitiveness today, which leads us to the second phase called Renovation spanning from 2023 to 2025. This is when we will benefit from a completely new and revamped lineup, electric and electrified, centered on larger profit pools and allowing us to finally leverage a portfolio of strong and differentiated brands. And then third phase is Revolution. From 2025 onwards, traditional OEMs will have to jump on the value chain of new mobility. Customer expectation are wider and different. It's about becoming a player in the data, energy and services. We are getting organized to make the Renault Group a front-runner in this race, scouting as of today for opportunities to make this company less dependent on traditional businesses. These phases have different end points, but it is important for me to say that for all 3 phases, the work is already underway as of today. I will now briefly hand over to Clotilde for a snapshot of our turnaround road map. Clotilde?

New ambitions call for a new compass. Indeed, we're also changing the way we measure our performance. We no longer talk about market shares, sales and synergy records. We talk about profit, cash and investment effectiveness. In the construction of the plant, we went for cautious volume and flat market shares and assume markets would return to precrisis level by 2023 in most emerging markets and beyond 2025 in Europe. Any outstanding success of a product, any unanticipated rebound of the market, any opportunity to partner in order to synergize investments that might happen along the way will just come on top of these numbers. We commit by 2023 to reach more than 3% group operating margin, accumulate around EUR 3 billion operational free cash flow and lower our investment around 8% of turnover, moving from double-digit to low-level industry standard in this phase. We'll get there step-by-step, but our operating margin will stay penalized by the high level of depreciation and by decreasing R&D capitalization ratio. By 2025, we aim at more than 5% group operating margin, around EUR 6 billion of cumulative 2021, 2025 auto free cash flow and a ROCE improved by more than 15 points compared to 2019. That KPI wasn't our focus up until now. It becomes fundamental as we have agreed as a team to be strict on the quality of our investment decision. Now back to Luca.

Thank you, Clotilde. Thank you very much. So as I said at the beginning, a new game requires a new organization on the field. This is the way it worked before. It's a matrix with at least 4 dimensions, too many layers, too many people on the same boat, too many shared responsibilities, too many silos and the go-to-market going through the regions, with an underlying assumption that all that matter were size and volumes. Now let's look at the way we are working since 1st of January 2021. It is simpler, it's flatter, with 1, sometimes 2 layers less. It's not a matrix, it's a flow. I like to think about it like a 4-wheel drive car, the 2 front wheels, pulling, are the brands. The 2 rear wheels pushing are the different function and engineering first. Everything well anchored on the strong Alliance platform. In the new structure, the brands are clearly in the driver seat. They're responsible for margins, ROCE and customer satisfaction. They pull the organization towards targeted customer end markets. Engineering faces directly the brands for the business and has full responsibility on timing, cost and performance of product development. Everybody else is there to ensure the connection between the front and the rear wheels works smoothly, and every piece is in the dearing and caring hands of experienced, credible and passionate leaders. I think it will do the job and give us the necessary support to face the huge challenge we have in front of us. Now let's look first at how the functions will contribute to the plan, beginning with engineering. Here, Gilles Le Borgne gave 3 priorities to the team: efficiency, speed and value for the customer. Efficiency means, first, that we are streamlining by 30% the engineering organization through optimized outsourcing, digitalization and reduction of G&A. We invest in new tools, for example, to divide the prototype cost by almost 2. We must redistribute workload amongst the different global engineering center to reduce engineering rates. We already see a decrease of over 20% in R&D net expenses in 2020 compared to 2019. We have also reorganized the product development process to increase our pace and speed. So this modernized lean organization will allow us to reduce, by a whole year, our car development time from concept freeze to start of production. That's about 25% of the development time saved. New models to be launched on existing platforms will be in the market in less than 3 years from now on. After speed, diversity reduction has been our battle in the last month. Behind all our launches, there will be a 30% reduction of complexity from platforms to powertrain, down to components without losing coverage, neither on markets nor on profit pools on the contrary. The Alliance reach in technology will further boost our efficiency. We can proudly show that with the product strategy, we will be able to produce an unprecedented 80% of vehicles on just 3 Alliance platforms. We'll be efficient, we'll be flexible, and those platforms being EV dedicated and multi-energy and covering all segments from A to D. So when people question me whether the Alliance is working operational, I'll just show them this chart. Along with Nissan and Mitsubishi volumes, those 3 platforms will accumulate over 6 million vehicles per year across the Alliance. So when it comes to scale, that puts us in the finals of Champions League compared to other automotive groups, and that's more than we have ever, ever done. Along with the platforms, we agreed on one of the most extreme powertrain rationalization exercise in the automotive industry. I know you're thinking that going evergreen comes at a growing cost. Yes, powertrain will cost up to 2.5x more in the next years with a direct effect on pricing. But over the same 10-year period, our pure electric powertrain cost will be divided by 2. The other good news is that for us, it has been already all invested. Energy mix-wise, we will be able to smartly leverage our legacy technology and invest in the future where we see Renault as one of the most progressive OEM in this direction. And it goes like this. We'll have fewer powertrains equipping more vehicles and spanning on a wider horsepower coverage. We will reduce the number of powertrains from 8 to 4 families. But in fact, we'll only rely on 1 gasoline powertrain that combined with the E-TECH modular hybrid technology will allow us to cover low-, mid- and high-power and, therefore, price ranges. So with the set -- that setup, I would say, we consider that we will pass regulation on ICEs and hit CO2 objective even beyond 2030, with very limited additional investment, as it will be about changing battery size or changing the electric engine. This technology, ladies and gentlemen, is one of the hidden gems in the house. One family of diesel engine, we have already invested and would be dedicated to light commercial vehicles for as long as we need. But parallelly, we are working to integrate the most competitive hydrogen technology and adapting the current engines green fuels. We'll focus on taking advantage of our scale and experience to push on pure electric platform for small- and medium-sized vehicles, with same battery module in LFP and NMC chemistry. We are engaging in the future, playing the leaders game when it comes to energy transition. Now the good news, I repeat, is that all investment in hybrid and EVs are already behind us. Based on this strategy and according to our modeling, we should be in the position to pass the 2025 regulation gateway. And for the time being, I can confirm that we have made it in 2020, and we are on track to meet 2021. Now here is an information that might be interesting for you. We are already generating more contribution margin per pure electric car than per the IC-equivalent. In 10 years, we were able to reduce by half the cost of electric powertrain, and we consider that with the next battery generation in 2023, '24, non-dilutive pure EVs should be within our reach. For the E-TECH hybrid, we aim to reach the cost level of the European market leader in 18 to 24 months. This is our life insurance in the challenging times of powertrain transition, something that puts Renault in a very, very comfortable position. In the same smart way, we want to approach the integration of the key automotive technologies in our vehicles. The message in this chart is, I would say, pretty simple. We will be at best competitive level, thanks to the possible sharing within the Alliance, and thanks to a very open approach to partnerships. I have already mentioned the scale and cost advantage we have on platforms and powertrains. On connected services and onboard AI, I have to admit that I was very convinced about the potential of the partnership with Google in the moment I drove the prototype of the Megane E a few months ago. It is a totally different user experience compared to homemade of -- or integrated system by traditional suppliers I have known before. We will develop this partnership further simply because it brings something better than the competition for our customer. When we will be launching that technology at a world premiere on our midsized EV next year, we will be leading the pack for sure. You will see. On ADAS and autonomous driving, we have made a decision of being fast followers, as we don't currently see a clear business case in the markets where we are operating. We will be quickly adopting technology, leveraging the Nissan push who considers this application as fundamentally in their strategy to compete in markets such as China or Japan, where everybody expects adoption will be faster. Now let's turn to the work and the decision we have made on the industrial side. I suspect not many people know that the Renault Group is already industry benchmark for manufacturing cost per vehicle for the cars we sell in Europe. I would say thanks to a very cost-competitive manufacturing network, including Spain, Turkey, Romania and Morocco. This is a fact. Now the new strategy we're putting in place will allow us to gain additional 20 points of competitiveness in the next 3, 4 years, giving us an edge on this, I would say, a very important KPI. So what do we plan to do? We'll take our 2022 plan commitments a step further. We'll lower our capacity from 4 million in 2019, down to 3.1 million in 2025. Our plant utilization rate will recover from its 70% level in 2019 to over 100% already in 2023. We are already starting to rightsize infrastructure, sell unnecessary assets and services. And obviously, as most of the new products are being developed on existing platforms, they will be there, I would say, to better fill existing capacity. Now the combination of all those actions, plus the fact that a lot of investment went into the upgrade and automatization of our plants in the last decade, will allow us to have a lean and high-performance operational system on the industrial side. Don't ask me today where exactly we'll take action. We don't want speculation or media buzz to hinder the work that we have planned to do. But believe me, we have a very clear and strong ideas and concept on where we want to be in not more than 3, 4 years. But we will do it in the Renault way, meaning in the full respect of the expectation from the different stakeholders, especially our workforces. We have already started on the reconversion of the historical plants. And this, for me, represents a very good example of our approach. Renaulution means also a fundamental rethinking of our go-to-market strategy. Of course, with different starting points and different challenges here and there, but with a common criterion in developing the plan. We'll stay only if we see the potential to make a profit. Let me remind you that, even without considering the Alliance, Renault became in the last 20 years a true global player. This global footprint is a real asset for the group. Outside Europe, it represents half our sales, 2/3 of our workforces, 6 design and engineering centers, 16 vehicle production sites. The fact that we didn't reach the profitability we wanted doesn't mean that we want to give up on our global footprint. On the contrary, it means that we need another approach. We are going to change strategy on the product, rightsizing where necessary, as we've done, for example, recently in Brazil, stopped the rush for market share at the expenses of profitability. We'll optimize our operations in Latin America, in India and Korea. We'll strengthen our competitiveness in Spain, Morocco, Romania and Turkey, for example. And we'll create more synergies within Russia because we see the potential for that. All these efforts from all functions will fuel our 2022 cost reduction plan and take it a step further. So let's have a look at the impact on our fixed and our variable cost. We have a visibility to achieve our EUR 2 billion fixed cost reduction objective well ahead of what we have committed to maybe by the end of 2021. The fixed cost reduction effort is happening everywhere in the company. And even more so, I would say, in engineering, where it is normally more complicated. We'll push it further by 2023 to reach EUR 2.5 billion. We have plans to go further with cost discipline, including, amongst other things, a plan to revise our direct involvement in distribution markets, including with our own dealers. We think we can achieve over EUR 3 billion by 2025 when the rightsizing of our manufacturing footprint will fully kick in, as I have mentioned before. And on the variable cost side, we have new design to cost approach in the product development, a clear cost responsibility to the chief engineers for new projects and to manufacturing for series cars, 30% reduction in diversity, stricter rules of up to 85% on carryover between products and earlier involvement of suppliers in the process. And all of this, I would say, makes us confident that we would be able to achieve a EUR 600 reduction per car at ISO perimeter by 2023, so in 2 years. I had the chance to meet the CEOs and the leading teams of our top 10 suppliers to challenge together business-as-usual practices. And I have to say that their response makes me optimistic that we will achieve the targets, doing better work from our site, allowing them to plan for the long term and reduce the unnecessary costs generated by our own complexity. I think it's a very healthy base for a new beginning in our relations. And I thank all our supplier for their commitment because this is one of the areas where we will have to make the difference, and we will do it together. All in all, the picture on variable costs will look like this. We anticipate an increase of unit costs due to higher segment mix and especially from the enrichment following the regulations. But this will be true, I think, for everybody. The EUR 600 mentioned earlier will only partially compensate it. In addition, by our calculation, the effect of a renewed lineup and the change in market focus, we believe, will be able to overcompensate and, therefore, increase margins. Now the question is, are we able to cover the additional cost coming from regulation? The answer is, yes, we can and we will. The combination of cost reduction and our increase in net revenues means a reduction of our breakeven point by more than 30% by 2023. But please note that in 2021, we will be already able to show a drastic improvement. Now coming to revenues. Let me show you the playbook of our product renovation strategy. We'll regain our legitimate rank in the C and D segment, with a total of 11 electric or hybrid new models pushing the contribution of midsized cars to our contribution margin from just 15% in 2019 to 40% in 2025. We'll manage this offensive, while maintaining our leading position in the small car segment, with 5 electric or hybrid new models. We will secure our position in the LCV segment with 6 models, of which 3 pure electric. And most importantly, we will be profitable in all segments. We'll take now a pause, watching a short video, talking about the topic we didn't want to omit while building the plan, quality, quality. So let's look at how the Renaulution will impact this discipline, too. [Presentation]

Quality is a key topic for any OEM. We normally divided in 3 dimensions: reliability, perceived quality and durability. In the world of shared economy and new mobility, where you sell kilometers rather than the vehicle, we have a strong motivation to break the classical consumer cycle, which, by the way, all carmakers have contributed to create. In this new world of circular economy, we want to reduce amortization on the hardware to lower down total cost of ownership and offer the possibility to upgrade the product throughout the life cycle. Our battery, now we know, can last easily 10 years, and upgradable software architecture will make this easier. That's why we have engaged on the 1 million kilometer ZOE project. And for us, it is a symbol of the priority we have set to become the true front-runner in the new game. You will see the business implication when we will later speak about the mobilized brands. Now before closing this chapter, let me point out that although I've been talking often about the future, the work has already begun at Renault. And it has been, I can tell you, intense and also fruitful. We appointed Mission 1, a dedicated team whose both sits in the Board of management and is surrounded by the best people in the company to focus on the turnaround of the entire organization on cash revenue and cost optimization. We are going much faster on the previous plan commitments on fixed cost reduction, as I mentioned earlier. We have reshuffled all lineup in a matter of weeks. We stopped, I think, 7 programs and decided to launch 8 new ones. We are already creating value. With the help of our commercial teams, our importers and dealers, we were able, in just one quarter to cash back 5.5 points in net pricing, and we expect to go further by the end of 2020 and are determined to sustain this trend in 2021. Something unexpected for many, but an achievement that shows that everybody has rebooted the operating system at Renault. Earlier, I told you about the organization being like a 4-wheel drive car, with the rear wheels being the function, pushing the performance. Let's now move on the front wheels, which pull the system towards the customer, the markets and the business; in other words, the brands. We were speaking earlier about an unresolved approach to brand portfolio management. This is a simple way to represent it, growing overlap between Renault and Dacia, duplication between Renault Sport and Alpine, no clear customer targeting, no distinctive technology hierarchy, no time line and technology allocation amongst the brands. What you see now is the way it's going to work from today, supported by dedicated organization. Dacia will stay Dacia, offering accessible products based on proven and affordable technologies targeting smart buyers in any segment where we can provide a solution. The Renault brands will embody modernity, to offer solutions in the core of the market, Renault will push the envelope on EV and hybrids, tech and services to attract progress mainstream buyers. And finally, Alpine will move from a kind of a nostalgic position to become our tool to play automotive avant-garde, fully electric, still sporty and exclusive. It will give us the chance to start from scratch on all parts of the value chain, from engineering to distribution, in order to attract passionate early adopters and then mobilize, mobilize goes beyond into the field of data, mobility and energy services and will enable us to dive earlier into the new world of mobility, providing solutions and services to other brands and partners, but also attracting customers that don't want necessarily to buy vehicles but merely use them. Now let's start with Renault. [Presentation]

For the Renault brand, we say La Nouvelle Vague of European automotive. That's the ambition we gave ourselves in a time where a lot of disruptions and discontinuities are giving us the chance to kind of reshuffle the cards. Nouvelle Vague, as you probably know, was the name given to a new film style emerged in France in the '50s and the '60s, challenging the Hollywood mass market dogma, a new way of doing movies, which, at that time, had actually a global influence. And why? Because it offered a smart cult, soul-filled alternative, and it represented, at that time, modernity in that industry. But what is modernity in the automotive business today? This is the question, and this will also be the role of the Renault brand in the house. Beyond doing what everybody expects an automotive brand to do, that means engineering, producing, distributing and, of course, servicing good cars. And modernity is not just about integrating tech in our product. It is also about managing smartly the energy business, generated by electric batteries and offer unique services. I will dedicate some minutes to show that we have strong arguments, strong assets and projects that will substantiate this ambition. We will turn Renault into a tech brand, into a service brand, into an energy brand. We are also putting modernity at the core, and we think that by putting modernity at the core, we will be able to reinvent our footprint in France. We have the assets to push the entire French automotive ecosystem on the higher end of the value chain. So let's take a closer look at how we will be competitive in each one of those 3 fields. First, it's energy, on energy transition, especially. We are able now to challenge the leader on the hybrid market with our modular, very competitive technology. The technology we call E-TECH. We think that this is one of the best solution for European driving conditions. It's powerful, it's green with up to 80% electric driving for an HEV in the city. We are also determined to sustain our leadership on EV. First, by leveraging our 2 EV platforms to create families of product in the C segment, but also in the B segment. Second, by sharing components and especially battery modules, we will be able to develop profitable EVs at the price of combustion engine powered models. You'll be able to see one of them very, very shortly. Finally, by enlarging and converting one of our plants into the biggest EV factory in Europe. We are working on ways to make it in France, including, for example, the creation of battery plants with one of our top suppliers. This is what we meant when we were speaking about the electro pole. Finally, we will also offer market-ready end-to-end hydrogen solutions for LCVs. We have just signed, as you've probably read, an MOU to create a JV with Plug Power. Plug Power is one of the global leaders today. And together, we will design fuel cells LCV based on Renault platform and offer turnkey solution for customer, including vehicle, including refueling station and also decarbonize hydrogen delivered, the whole chain. We will be based in France where we will gradually localize the production of the fuel cells. Our objective, in general, is to become European #1 in fuel cell LCVs, targeting a market share of about -- or over 30%. The target is clear for the whole Renault brand. The target is to reach the greenest mix in the European market by 2025. Out of the 14 vehicles we'll launch by 2025, 7 will be electric -- fully electric. All of our new models will have an electric or an hybrid version by 2023. 30% of our sales will be fully electric cars. 35% will be hybrid. We'll be both green, but also is very important, profitable. All our EVs have better contribution margin than their IC equivalents. Now let's talk about coming from hardware to software. So better, let's talk about our new approach to software, an ecosystem that we call the Software République. This ecosystem approach aims at creating world-leading, next-generation mobility OEMs and suppliers, engaged in building European know-how and defending our sovereignty in these key technologies. We will develop joint expertise in user interfaces, big data, service platforms, operating systems, cyber security and better computers, sensors, actuators, just to name a few. Amongst the founding members of the Software République, we can see great companies such as Orange, Atos, Dassault Systémes and STMicroelectronics, just as a start. You have to imagine the Software République as a giant real-world lab where experiments on connected autonomous cars can be led in a controlled environment in real-time. To do so, we will open 100,000 square meters in our facilities to our partners. And in this space, software and other groundbreaking innovation will be developed and will be tested. We will offer proximity to our engineering infrastructure, to our technical skills, and we will include our Renault software factory. And this lab will bring 1,000 engineers and data scientists, I think the best you can find in the market. These activities will create, I believe, immediate opportunities for the automotive industry, but also for other sectors such as defense, infrastructures, aerospace, telecoms, electronics, mobility and, of course, also the data industry. The Software République will be one of a kind in Europe, and Renault will be one of the founding members. So how will this translate into our cars? This is automotive 4.0 artificial intelligent infused. Our cars will get better every day as they are driven. Leveraging in-house expertise and our Software République ecosystem, we'll offer the best connected high-tech services embedded natively in our vehicles. Let's take a look at how it feels. With our in-house Renault app, we call it MY Renault, our customers stay in touch with their cars, control them from their smartphone and prepare their trips. In 2022, Renault will be introducing My Link, a new infotainment system with Google built in. We'll be the first carmaker to bring Google Services to mass market cars. With Google Maps, navigation will be personalized based on the car user's frequent destination, including enhanced electric vehicles functionalities. Car users will access their favorite apps on Google Play and control car features hands-free by voice. Our cars will become more intelligent every day. In the future, they will adapt their functionalities proactively to meet the needs of our drivers. Our vehicles will gain value over time. They will be constantly enriched with new features, which will be offered to our customer over the year. Megane E will be the first vehicle equipped with My Link starting in 2022. Now on top of getting more intelligent, the second characteristic of Renault product is that they will last longer. You have seen our remanufacturing and refurbishing services work with the ZOE just a few minutes ago. We plan to make it a known mark of our brand. This is particularly relevant in the fleet world and -- but also in the mobility world. This approach will have a big and positive impact, for example, on our residual values, but not only. So by taking a fresh look at the plan, we actually came to realize that we are the biggest recycler in this country. We have a clear advantage when it comes to second life and end of life of batteries. Or in other words, a lot of money is available during the life cycle. And the control of this part of the value chain has the potential to fundamentally change the business case of electric cars. At the Re-Factory Plant, we will recondition more than 100,000 used cars per year. We will repurpose diesel, light commercial vehicles and convert them into biogas and to release. We will upgrade mobility platform vehicles with new batteries. We will collect used batteries and find them a second life. This is also why we say that Renault vehicles will actually last longer. I think this is also a strong commitment to sustainability. So now let's conclude the Renault brand section with a classical product planning chart, actually not a very classical one, and also with the go-to-market strategy before coming with a little surprise today, only for your eyes. When you look at the chart, in summary, in 2025, we will be launching 14 Renault core vehicles. 7 will be full electric vehicles, 7 will be in the C and the D segment. It is a double down on both electrification and mix improvement. In Europe, B segment launches are 100% electric. And because our EVs already today generate a higher contribution margin than their IC equivalents, the segment will remain a pillar of profitability for the group. Our C/D segment launches are 100% electrified and will total 45% of our sales mix in 2025. The consequence of this product plan, and I must say, taking some cautious assumption on volume and pricing, is that we will increase our average price by up to EUR 5,000 by 2023 and more than EUR 7,000 by 2025. Speaking about market portfolio management this time, I want to say that, for sure, we want to stay global, but with a different philosophy. We'll reconquer our position in the C segments in Europe to generate margin first, but we will also focus on more profitable segments and channels in countries such as Russia, in Brazil, in India and in South Korea. This is the approach and the strategy. Finally, I'd like to say also that, once we would have settled the current challenges that we have in China, we will consider coming back because it's an important country. And when we -- but when we do so, we will skip, I think, directly to the next generation, directly to the 6G, if you will. We are aiming at being profitable in all markets by 2023. Now let me finish before leaving the stage to Denis Le Vot, the CEO of Dacia, Lada business unit. Let me leave you with something showing what Renaulution means when it comes to product. [Presentation]

I know by experience that when you are able to reinvent some cult products of the brand, it lights a fire under the whole brand. This is what we expect with the new Renault 5. It's a pure electric vehicle, but at the price that many, many people will be able to afford. And this is only the beginning for the Renault brand. [Presentation]

Hello, everyone. I'm happy to present you the brands Dacia and Lada together. In fact, these 2 brands have a lot in common, and this is why we decided to bring them closer in the organization. Indeed, they both sit on the very cost competitive technical, industrial and distribution setup, making each of them a very profitable business. This model is something very difficult to replicate, at least for our European competitors. Behind Dacia and Lada's popular lineup lies a unique all-weather business model. First, a frugal and disciplined design-to-cost approach in the product development, leveraging the best technically proven and amortized solutions in the group. Second, a labor cost of less than 1/4 of what we see in Western European countries, combined with a very high local integration ratio. All this brought together gives to our cars a double-digit cost advantage versus competition, completed by a very lean distribution model based on low discount retail sales. Both brands stand for real value for money, and both address the smart buyers, which represent more than 20% of the world global demand. And that is why we sell a lot of them. You might know that Lada Granta and Vesta are #1 and #2 in Russia. You might not know that Dacia Sandero is the most sold nameplate in Europe, if you consider the pure retail market. Duster is the most sold SUV on the same perimeter. These blockbusters show that value for money never goes out of fashion. The idea behind the creation of the business unit is that Dacia and Lada will remain separate companies with their own brands, history and strategy, but they will benefit for more dedicated, focused and coordinated governance. More importantly, they will be better integrated within the Renault Group to leverage synergies. Let's see what it means from a technical standpoint. Concretely, we have decided to base both range of product on the very cost-competitive and flexible CMF-B platform. We are talking here about more than 1 million cars per year to be produced in competitive locations: Russia, Romania and Morocco. We will go from 4 platforms to 1, from 18 body types to 11, with up to 85% carried across between the models. And finally, upgrading the substance of the product from a quality and technical standpoint as this new platform is brand new and recently invested. But now let's talk about the product planning. The idea is also to unleash the potential of Lada and Dacia, making them full-fledged international brands, enabling them to go beyond their current perimeters in terms of markets and segments. The CMF-B platform enables us to tap into the C-segment, with vehicle longer than 4.5 meters, as you will discover in a few seconds. This coverage extension potentially doubles the profit pool we can address. Lada will consolidate its leading position in Russia, with state-of-the-art vehicles, therefore, not only defending more than 20% market share, but also focusing on share of wallet. And we will not stop at the Russian borders. Our ambition are international. Entering the C-segment, Dacia will be in the position to increase its average price by a fat 30%, thanks to the new product portfolio. Very importantly, it is all starting right now in 2021, with the launch of the new Sandero. Just Google Sandero, and you will see the reaction of the press to this new platform. And continuing very soon with the all-new pure electric, Dacia Spring. But what shall we do with the brands? Beyond those products, we have some ideas on how to give a new spirit to Dacia and Lada. Let's take a look. [Presentation]

Yes, Niva. In 2 sizes, compact and medium, based on the same CMF-B platform. Niva is a cult product and not only in Russia, it is the Russian automotive proxy of the Swiss Army knife, a technical product for usage in extreme condition, 4x4, high stand, short gears and robust construction. We all know that any Russian family has a story to tell about the Niva, like any French family with Renault. Furthermore, we think this product has a space beyond the Russian market, as they've always had. So besides the complete renewal of the mainstream range, the relaunch of the Niva will enable the complete repositioning of Lada as a brand. And now Dacia. Shall I say, [Foreign Language]. Dacia will stay Dacia, always offering the best value for money proposition in all segments we play in. But we want to bring the brand to higher grounds. Take a look at this. [Presentation]

This is the new C-segment SUV by Dacia, the Bigster concept car. 4.6-meter long, on the cost structure of a B-segment car, and it can be fitted with alternative or hybrid powertrains for compliance with CAFE or local regulations. As a conclusion, our strategy for the 2 brand consists in 4 pillars: maintain the unique business model based on design-to-cost competitiveness and lean distribution, enhance industrial synergies between Dacia and Lada with CMF-B platform and diversity reduction, reinforce brand identities for each brand, expand lineup in C-segment and increase average price. To sum up, Lada is rough and tough from Russia to the world, and the Dacia brand is the best value proposition in its segment, still with a touch of coolness and outdoor flavor. [Foreign Language]. Thank you.

Hello, everyone. I'm excited to present you, Alpine. The Renault Group has an amazing sports legacy, countless beautiful stories, gripping finish lines, memorable victories and podiums. From blue [ burly nets ] to yellow teapots, each with their own crowd of cheering fans. Part lies in the global spotlight in motorsports, part in a more confidential and niche sports brand. The new Alpine division will bring it all together, legacy in future, trucks and roads, F1 and A110 and ring it all with high-tech excellence and passion for racing. Welcome to Alpine, the avant-garde brand of the group. Alpine will combine assets once seen as cost centers within a certain future into a fully fledged new-generation business unit, developing exclusive innovative sports cars. Let's look at the 3 ingredients composing our core DNA. First, Alpine, a true brand. We have heritage and pedigree. Arguably, the epitome of French motoring, building its reputation and remarkable victories along breathtaking racing stages. But a brand will be nothing without the people building its products. As such, Alpine is also a factory, packed with high-end craftsmanship and savoir faire, as we see in the app. Second, Renault Sport, a team of 300 engineering wizards dedicated to special assignments, mastering the entire sports car development from design to aftersales. They gave us [ countless exciting ] products such as R5 Turbo, Clio V6, Mégane R.S. Trophy, the list is long. They're also behind the revival of A110. Third and last but not least, Formula 1. Our F1 team gathers 1,200 [ spearheading clockmasters ], developing the grand complication watches of motorsports, elite engineers trying to compete against the most aspirational and highly funded constructors. F1 is also a considerable marketing platform with 0.5 billion fans worldwide, a unique opportunity for global branding. By bringing together the credibility of an authentic brand, specialized manufacturing, engineering mastery and significant media exposure, we set the foundation to truly create market value around Alpine and take it into a different league. This core of key assets will be further strengthened by leveraging a solid environment. Alpine can lean on the scale and capabilities of the Renault Group and the Alliance, tapping into a rich pool of existing resources such as: leading-edge technology, including the Alliance EV-native platform offering best-in-class EV performance; top-notch production facilities and a powerful purchasing arm, entering optimum cost competitiveness and [ even a thousand-strong ] dealership network worldwide; and the array of RCI Financial Services offering the potential to multiply a hundredfold the distribution of Alpine. All of this will provide strong basis and immediate levers to the new business model. But above all, it's from within that this newly formed division will expect the necessary spirit and additional value to switch gears. Building on F1 expertise and technologies, we will inject cutting-edge features in all Alpine products. On the truck, every kilowatt of power is paramount. Energy management is a skill with home for more than a decade. Taking this expertise to Alpine cars, we will deliver a highly efficient electric powertrains, seamlessly connected to the road and the grid for best-in-class experience. On the truck, time is of the essence. Data must not only be swiftly exchanged but also rapidly analyzed and processed. F1 know-how will translate into state-of-the-art connectivity solutions, but also turn Alpine's into intelligent machines, learning patterns to adjust behavior to routine commutes or sporty runs. More than ever, the future of Alpine is electric. We leverage the Alliance EV platforms to launch a B-segment hot hatch and a C-segment crossover, 100% electric. And we will team up with another legendary brand to imagine the future A110, electric, of course. Together with Lotus, we will develop the next generation of EV sports cars. These exclusive future-ready products are meant for discerning, passionate early adopters. Now with this exciting lineup we call a Dream Garage, the story becomes real. By now, there should be no doubt that racing in general and F1, in particular, will remain at the heart of our brand. We've renewed our full F1 commitment, and we'll enter the new regulations era in 2022 with the objective of consistently contending for podiums. 2021 will be a transition year for us like for all teams, but the climb towards the summit has already begun, and we'll probably defend the Alpine team colors with our very own Alpine Research. [Presentation]

I'm very proud to show you for the first time our F1 car for this season. Stay tuned. We'll unveil delivery of the newly minted A521 next month. To wrap it up, the new Alpine is a story of 3 brands and 4 entities, all merging into one to create a new valuable asset. We'll be agile, smart and opportunistic, leveraging the best of the Renault Group and the Alliance and teaming up with partners to go even further. Our goal is to be profitable by 2025, including investment in motorsports. We moved from nostalgia to avant-garde by offering an exclusive authentic lineup made of high-performance EV sports cars for everyday driving. Thank you.

Let's now move beyond automotive. Mobilize is a brand on a mission. Embracing disruption will help solve 3 major challenges of the auto industry. First, the gap between usage and cost. People pay 100 but use only 10. Second, the rapid loss of asset value. We will fight against a residual value dictatorship, the one imposing that new vehicle value should drop by over 50% after 3 years, independently from product physical obsolescence. Third, emission. In Europe, the auto industry weighs about 15% of the CO2 global emission. We strive here for a zero impact. Why are we embarking on this mission? Because many customers are expecting more from automaker. They move away from consumerism and wish for responsible, efficient, clean solution. As a carmaker, we have all the assets and expertise to choose the role we want to play in the new car usage. We'll transform this disruption into opportunity for profitability. Beyond the core auto industry, we'll capture new growth territory. The value chain is evolving quickly. Value pools are shifting up towards moving to mobility, energy and data services. All in all, these 3 value pools will grow by 40% from 2019 to 2030 to a total of over EUR 370 billion in Europe alone. This will be the playing field of Mobilize. Why will we succeed? Because we have unique assets and a smart business approach to leverage them. First, we know how to make cars, modern cars, purpose-designed vehicles meant for mobility services. Second, we know how to do business with those cars beyond selling them. RCI can offer a right array of solutions. Third, we will provide data, AI and mobility software platforms and best-in-class onboard connected services. Beyond digital, we can extend our service offering and geographical reach, thanks to our unique network of physical touch points with 6,000 dealerships in Europe alone. In addition, we can leverage the Re-Factory in Flins to extend vehicle and battery life. On top of these assets, we have created a dedicated, agile business unit. Mobilize will have its own engineering and design teams, its own service offer in energy, data and mobility. It will also benefit from Renault Venture to work with start-ups. Now how will we create value for all stakeholders? First, as mentioned, our purpose-designed vehicles will be engineered for mobility services. Their robustness, lightness, modularity will optimize their operating cost and being electric will enable them to access cities anytime, anywhere. Let's take an example. The car-sharing service, ZITY, in Madrid operating on ZOE, was roughly breakeven before COVID-19. It was a successful mix of using algorithm and leveraging Renault dealers. Imagine the impact of using Spring, which is twice as cheap. In average, we aim at reducing operating costs by a minimum of 20%. Second, we'll make fleet acquisition easier. The financial services provided by RCI will allow fleet operators to subscribe, lease or pay-per-use. This way, fleet ownership costs can become variable. Smartly financed fleet operation can turn into an asset-light model. Third, we will increase used car usage, thanks to our dedicated mobility, data and AI platforms. We'll leverage the Renault Software Factory, the Software République and partners to develop leading-edge algorithm and data processing software. This will allow better prediction of users demand and better allocation of vehicles. We aim at increasing the rate of car use by at least 20%. Finally, we'll offer maintenance and recycling services for carsharing fleets. And when our vehicles are no longer fit for use, we have a sustainable solution. End of life for an electric vehicle does not mean end of value. At the Re-Factory, we can recycle used electric batteries by giving them a second life as a stationary source of energy. This will generate at least EUR 1,000 per battery. Let's now take a sneak peek at our cars up our sleeve. This lineup is adapted to the most critical new mobility needs. Car-sharing, ride-hailing, last-mile delivery, and we're also working on on-demand transit. Let's start with our Ace, EZ-1. EZ-1 is a snappy 2-seater, fit for end users, operators, cities, you name it. Cost efficiency meets durability, EZ-1 zooms around single or dual. It's electric and modular, the rear seats can turn into a trunk. It's exchangeable batteries will make it independent from public infrastructure. Made out of 50% of recycling materials, it will aim to be 95% recyclable. On to the King. The King is the latest Dacia revolution, all-electric, lean and affordable. That's the best cost of ownership operators can get for a 4-seater. And like all Dacia vehicles, it's robust, practical and focused on the essential. The Queen. The Queen is entirely designed and developed for ride-hailing. It has an autonomy range above 400 kilometers. It will offer best-in-class roominess and comfort with its 4.6 meter length and 1.8 meters width. Finally, the Jack of All Trades. The vehicle we draw on our concept car, EZ-FLEX. It's last-mile delivery solution is agile and practical, with an innovative loading and unloading module, and its cabin is especially designed for high-intensity door-to-door delivery. This is our hand of cards to win the mobility services game. Now let's see what an ace on wheel can do. [Presentation]

In conclusion, Mobilize will provide access to vehicles and mobility services directly to end users through corporates and cities. We'll offer a unique combination of hardware and software, dedicated vehicles and leading-edge services. We'll build on an integrated and seamless client experience onboard and offboard. We'll leverage our proprietary data from connected vehicles and mobility services. We'll benefit from our ecosystem of partners and start-ups. So overall, by offering access to cars from 1 minute to a lifetime, we will create a unique value proposition for end users. Our turnkey solutions, including fleet financing, ride-hailing, car-sharing and energy services will also create unique value proposition for operators and public authorities. All in all, Mobilize aim at contributing more than 20% to group turnover in 2030. Thank you. [Presentation]

Let me take back my CFO hat with my usual bias, under-promise, over-deliver. Let's be clear, the Renaulution marks a new beginning for the group. In order to illustrate how we will exceed 3% operating profit by 2023, we have split the impact coming from external factors and the one depending on us. We're not betting on a strong recovery after the exceptional 2020 situation. But even though this visibility remains limited, we expect around 25% increase in our main markets in the new 3 years versus 2020. The hidden bar shows the main external factors like raw material, ForEx and the nonrecurring cost reduction related to the 2020 lockdown. We also have, in this bar, the provision we have accounted for in order to cover unexpected risk. The next bar is what we expect from our commercial performance and sales to partner. The impact is negative because our focus is no longer on volume, and sales to partners assumptions are based only on the existing contracts. Therefore, the chart does not reflect any potential new business upside. Cost reduction will be the strongest lever for our margin improvement. As I already told you, part of the cash cost reduction is not helping the P&L as the lower capitalization ratio and the increase in depreciation will limit the P&L improvement. The second major lever is the mix/price enrichment. Beyond the pricing policy, the mix will increase as we have a clear ambition to do better business rather than more business. Enrichment will come from the required electrification of our lineup, but even after these costs, this bar should be a strong positive. The last bar is the increased contribution of AVTOVAZ and RCI. Here as well, we have been prudent when setting the assumption. We told you that cash generation was our top priority. The cumulated cash flow from 2021 to 2023 is going to more than cover our investments. This will be the consequence of the improved cash profitability and lower investment. I must add that the cash flow assumption includes a dividend payment from RCI to the auto business. And as you know, the timing of this payment is subject to European Central Bank decision. The working capital improvement should generate some cash inflow, sufficient cash inflow to the same tune as a restructuring outflow for the period under review. But we have not factored in a strong working capital inflow as once again, we based this plan on the quality of the business and not on volume. We will keep our investment in R&D under control. First, because we've passed the peak and invested in the most advanced technology to comply with ever stricter regulation. The investment may not have been the wisest, but at least now, we have good assets to build on. The second, because we made decision to stop programs that were too expensive to provide a good return. R&D costs should decrease from about 11% of revenue to below 8% by 2025, thanks to a clear focus on ROCE and much lower diversity and complexity. At the end of H1 2020, despite the COVID impact, we had EUR 16.8 billion cash in hand and confirmed credit lines, including EUR 5 billion state-guaranteed credit line. During Q3, we have drawn down EUR 3 billion of this facility and then another EUR 1 billion in December. The reason why we have decided to use an additional tranche is that this facility was to disappear at the end of 2020. And given all the uncertainties with the pandemic, we thought it was wise to increase our war chest. The reimbursement schedule that you see on the chart does not include the redemption on this credit facility as we want to keep the benefit of its relatively flexible reimbursement term. But in any case, we'll keep our liquidity reserves, including the confirmed credit lines at a minimum of 20% of our revenues. As you see, our destination is a place where the operating margin will be at least 5%, with a total cumulative free cash flow of EUR 6 billion between 2021 and 2025. And finally, an improved ROCE by more than 15 points. And I think this guidance confirm the turnaround underway in the company. Thank you, and back to Luca.

I would like to take a minute to comment this turnaround road map. A minimum of 5% of operational margin might seem a lukewarm ambition. First, let's not forget where we come from. A little over a year ago and before COVID hit, our results started to deteriorate with an automotive operating margin down to 1.3% in H2 2019. Last summer, we reported a negative operational margin of EUR 1.2 billion and a negative free cash flow of EUR 6.3 billion. Second, our numbers are bottom-up and rock-solid. Our assumptions are cautious. We did not bet on any market or partnership upside, as Clotilde said. Third, this financial performance will be the consequence of the profound transformation of our operations. We've set the basics, steady, healthy, sound foundations for a sustainable performance. To do so, we have done more than just resizing and cutting excessive costs. We streamlined our organization with a purpose in mind. We have stopped programs, initiated new ones and reallocated our capital wisely. We concentrated our efforts on highly efficient modular, multi-energy and full electric platforms. 80% of our production will be based on them. One single family of ICE powertrains will keep all our passenger cars. We pushed the boundaries on variable costs reduction, embarking our top suppliers with us. Together with our efforts on pricing and sales mix, this will allow us to face the regulation-induced variable cost peak and still be profitable. This cost reduction efforts don't just aim at downsizing Renault, they aim at turning Renault into a leaner company ready to grow again. This leads to a stronger operational resilience, with a breakeven point lowered by 30% and more. And that's only the beginning. Meanwhile, we'll build an in-house capacity to face more regulatory challenges, innovate and offer competitive tech-infused smart vehicles. This in-house capacity is supported by brick-and-mortars assets like the electro pole, the Software République and the Re-Factory. It's also supported by new skills and expertise from the AI data specialists, microelectronics and software engineers. This in-house capacity will be the foundation on which we will build our own business within and beyond traditional automotive value chain. It is very clear to all of us that today, we are a carmaker integrating tech. But tomorrow, we want to become a tech company integrating vehicles. And we have already started the journey. Before ending this presentation, let me say 3 last things. First, I would like to hand over the stage to my dear colleagues and partners, Uchida-san, CEO of Nissan Motor; and Kato-san, CEO of Mitsubishi Motors. I have presented them our strategic plan. They could not be with us today but they did it, the kindness of, to say a few words.

Thank you, Luca. Hello, everyone. Today is an important day for Groupe Renault. I'm sure their strategic plan, Renaulution, turns a new page for them. On behalf of Nissan, let me take this opportunity to express my view. In summary, I believe Renaulution is a well laid-out business strategy, taking into consideration the current ongoing macro and industry trends, but also with an aggressive vision towards the future. I'd like to first congratulate Luca and the whole team under his leadership in crafting this strong plan towards Renault's revolution. When Luca shared this plan with me, I felt strong resonance with NISSAN NEXT, our digital transformation plan. With a clear focus on repositioning, I believe that Renaulution's concentration on brands and key segment while balancing product portfolio will help them deliver clear value and move them beyond automotive. This definitely complements Nissan's approach to beyond mobility and driving innovation. In May 2020, Nissan announced NISSAN NEXT that aims to return the company to a growth path and reestablish our foundation to compete in the coming decade. And currently, it is progressing well. Our alliance partner, Mitsubishi Motors, is also progressing on their recently announced midterm business plan, Small but Beautiful. Together with this Renaulution, each company's plan is designed to capitalize on the asset within the alliance. We all share common interest and are all aggressively positioning ourselves in connected, autonomous and education area. As Luca mentioned in his presentation, the complementary and collaborative nature of our business plans makes me very confident of the opportunity the alliance presents. We all need to be prepared to face a very challenging business environment ahead of us, a challenging environment that we have never seen. In order for us to remain in this race, each partner company will need to focus on their individual ambitions, capitalize on their strengths, enhancing our competitiveness and at the same time, collaborate more closely among partners to support mutual growth. It is critical that the 3 companies further enhance their combined strengths. On a final note, I'm looking forward to seeing Renault back on the path to long-term growth under the leadership of Luca. Nissan will also do its best. Please count on us. Thank you.

Hello, everyone. I'm Takao Kato, CEO of Mitsubishi Motors. First of all, thank you very much for giving me the opportunity to make a comment on Renault's new strategic plan, Renaulution, developed by Luca and the colleagues of Renault. After hearing Luca's impressive presentation, I'm more confident that Renault can achieve the goals of this challenging but dynamic plan, which is who knows, to realize further growth. In July 2020, Mitsubishi Motors announced our 3-year midterm business plan, Small but Beautiful. Renaulution and NISSAN NEXT both resonate well with our plan, helping us pursue value rather than scale or volume. I believe Renault's 3-step approach to 2030 calls for agility to adapt and evolve to the many uncertainty we face today. Mitsubishi Motors is now focusing on completing our structural reforms and further strengthening our competitive areas. I am glad to see a similar synergetic approach in Renault's plan. The current brand out for many areas of collaboration among the alliance partners and leverage collaboration as Renault strengthen their position in Europe, Nissan pursue their core market strategy in the U.S. and China, while MMC concentrates on ASEAN. As I said, the world has been facing with a very difficult situation, and it is going to continue for a while. However, I believe that we, Renault, Nissan and Mitsubishi Motors can overcome this tough situation and achieve our future plans by holding hands together. Thank you, and all the best to Luca and all colleagues of Renault.

Thank you, Uchida-san. Thank you, Kato-san. [Foreign Language] I know you are watching us from Yokohama and Tokyo. Your support is most valuable to us. I also want to take this opportunity to thank the Renault Board for their contribution and support. And second thing I wanted to say is that electrification is only one pillar of our CSR strategy. As a leader in this industry, Renault has an ambitious CSR plan, which will be unveiled at the general assembly in April, along with our new corporate purpose. I can already tell you that our CSR plan will be bold and revolve around 3 main topics: environment, safety and inclusion. Finally, I'd like to say thank you. Thank you for your support in general in these tough times. Thank you for your attention on this very intense 90 minutes. A special thanks goes to the people -- all the people that contributed to develop the plan and organize this event. Even though some of the ingredients were already in the house, most of these projects have been created and activated in the last 6 months. It tells you about the speed and energy moving our employees in this time of crisis. The Renault people want their company moving away from the state in which it has been recently. Imagine what might happen if we continue with that level of dynamism for the next 6 years. A particular thanks goes to the 40 colleagues of the source. You see them on the screen, the team that helped the Board of management feed and structure the plan. Our team has put all its energy in it, and the most important thing for me is that Renaulution is Renault people's plan. Seeing what I've seen, the project, the team the leaders, I'm now after 6 months, very optimistic that we will turn this company around and succeed. So thank you very much. We will open now after a few small preparation to your question in a few minutes. [Break]

So good morning, everyone, and thank you for being with us this morning. So after this rich presentation, I think it's time to open the Q&A session. So operator, who is first in line?

First question is from Thomas Besson from Kepler Cheuvreux.

It's Thomas Besson at Kepler Cheuvreux. I'll have 2 areas of questions, please. First, on brand positioning and then on the targets. So I'll start on brand positioning. I mean I like the ambition to lift the average transaction price so much for the Renault brand. But we've seen in the last 25 years that the Renault brand has not necessarily been able to carry such transaction prices, and the recent efforts to bring a fresh C- and D-segment products in the current Renault generation have not reversed the trend of market share loss. So is it possible to have something more than the arguments you've given us in the presentation to explain your confidence in the ability of the Renault brand to carry such a transformation in terms of transaction price? And maybe give us an idea of what proportion of your 2020 Renault volumes were already at or above EUR 27,000? That's for the Renault brand. On the Dacia and Lada brand, a simple question about the regional reach you intend to reach and the ability to limit the overlap with the Renault brand. Once you reach the C-segment in 2025, how can you do that? Are you going to refrain from having both brands in each market? Or are you going to use different tools to limit the overlap? I think you didn't mention, Luca, who was going to be the designer for each brand or whether it's going to be a team effort? On the targets, historically, Renault has been disclosing automotive and RCI margins. Should we expect from here that you are going to disclose profit contributions by brand? Should we assume as well that the targets you've shown, at least 3% and at least 5% are clean targets? Or are they pre one-off targets as in the past? And lastly, maybe more as a support than a real question. How much do you have in common with Peugeot for these targets? I mean we know they've under-promised with global targets, and the stock price also fell when they presented their different plans. Do you think this is going to be the same for you, negative stock price reaction initially and a stronger overall delivery on performance? I know it's a lot of questions, so apologies, Thierry.

No. That's fine, Thomas. Thank you for your questions. So I guess that the first one is for Luca.

Yes. So I think we have a strong argument. The idea of going back to the C-segment is nothing new for Renault. When I was here 25 years ago, Renault launched the Mégane family. It was a great idea with different body styles on the same platform. It worked pretty well. It's just that in the last generation, we missed the wave of C-SUVs and we started doing sedans or MPVs, et cetera, et cetera. So you can explain half of the, let's say, lack of performance to our bench basically because we didn't -- we were not so successful in the C-SUV. In the plan, you actually have 7 models on that between electric, combustion, hybrid, et cetera, et cetera. So I am very, very confident that the car will come, will make the job. In the proportion, I mean, it's difficult to answer what kind of proportion we have today. But I would guess that in the chart, we say we go to 45% of Renault cars in that segment. We're probably around now 25-something, 30-ish percent. So it's a big jump, but we have done that in the past. And it was because of lack of a competitive product, not because our dealers are not able to sell those cars or because the people are not expecting Renault to be between, I don't know, the EUR 30,000 and EUR 50,000 price range, if I may. I will use the opportunity to answer also the other question, not all of them. On the design, we have also organized the design by brand. So you have each brand, Gilles Vidal is on Renault, Alejandro Mesonero is on Dacia, Anthony is on Alpine and Patrick is on Mobilize. So -- but I also -- and Laurens is like the godfather of all of them is trying to govern this whole thing. You know that Laurens is a key member of our team. And what I've asked him, and I've asked also the newcomers is really to work as a team. So it's -- I think sometimes they are around the cars like with -- like very famous spin doctors, you need the opinion on everybody. That's the way I want them to work, but they need to keep the identity, they reorganized their offices. So I think we will create more brand culture by doing also that, and this is not only on design. The last one is on the comparison with the PSA. It's clear that what Clotilde say. We try to be very realistic, okay, in the way we define the targets. These are numbers that we did with the people in the company. So it's not only a top-down dream, and we are there to make sure that we are reliable as a team. That's why -- and that's why we commit to the 3% and then to the 5% minimum because we know we can do these numbers at -- even in the worst condition. And that was a rule of engagement by doing the plan. We kind of capped the volume. We were prudent, very prudent on the market evolution. But I think the company needed that rather than bringing about things that were more stretchy and then not deliver them. So it is clear that we go into some kind of under- promise, over-deliver kind of sports. Yes. So I think there was another one on...

Yes. Maybe I can rebound on target, and then we'll finish with Denis on Dacia. Yes, Thomas, they are very clean. I mean we have taken into account, as Luca said, assumptions on volume which are very fair. Everything, as I said already, everything which will come on top, like better market situation and outstanding success of a product. Any partnership, there is nothing on partnership in this plan. So clearly, this is what we know we can do. But clearly, the ambition in the company is to do a lot better. And you know me, we say what we know we can do. We want to do more, and we strive to do more on a day-to-day basis every week after every week and on the quarter after every quarter. We're reaching for what we know we can do and change the company. So that's clearly the ambition. Under-promise, over-deliver, whatever happens. To feedback on one of your questions also, we're organized by brand. But as you have seen, the functions still are central. So we're not aiming today at publishing our results at the operating margin level by brand. You're going to have RCI, as always, and the rest is going to be on a different line. But we're not going to publish by brand for the time being because the organization is really with central team for R&D, for manufacturing will stay central. So everything would be a question of allocation key, and we don't want to enter in this game. We prefer to keep it the way you have, automotive RCI for the time being.

And maybe one thing on the organization. Can I take the mic? So part of the organization is central. We have also tried in the brands to inject know-how. So you have, for each brand, head of engineering, head of purchasing and in the industrial part, but we try to do it in a lean way and keep centrally. That's what Clotilde was referring to, keep centrally what doesn't make sense to divide between the brands in a smart way. So one thing I want to say on the target to rebound on what you were saying is that as we took relatively prudent, cautious assumption on volumes even in the projects. That means all the projects are built with the new cars with volume projection, which is more than feasible. Of course, the leverage of volumes in size is pretty big. I mean I was discussing before with some of the colleagues, probably if you have a 5% increase in turnover, you get 0.5 points of profitability more. So that's the kind -- so you have a strong leverage. But how can you bet on an explosion on the market in a situation we are today right now? So I think it's better to do that, make sure that we can sit on a very solid platform, and then we will grasp any opportunity that the future give us.

Yes.

Denis?

Yes. Thank you for the question, Thomas, regarding the potential overlap of the brand. What we see today is that it should not be a problem because it is not a problem today. We have a great experience on the B-segment, and we are targeting different clients. I will give you 2. One example in Italy, I'm taking Italy here. When you take the cross-shopping, which is the hesitation of people buying a Clio, none of them in top 5, there is no Sandero. And if at the same time, in the same country, you consider the people buying Sandero and you asked them what was the hesitation models in the top 5, there is no clear either, which means that we are addressing completely different client. Example, Sandero starts below EUR 9,000, so these are different clients. But essential does not mean boring, and we think we can replicate this into the C-segment. And this is what we are going to unleash. And the car you saw is based on the CMF-B platform. So it's going to be super efficient, again, in terms of value-for-money proposition.

And when you know the kind of margin we do with Dacia, you can imagine what it can be on a C-segment. It's a huge potential, clearly.

Next question from George Galliers from Goldman Sachs.

And I have to say, I think everybody is probably excited by the new Renault 5. My first question is just on the margin target. Obviously, you've given group operating margin targets. Can you give any insight into what your expectations are of the auto margin target by 2023 and 2025? I think if we do some sort of rough calculations based on the level of profitability expected for RCI, in fact, it would imply a 1% margin for automotive in 2023. Does this sound sort of reasonable to you? And then the second question I had was just with respect to the fuel cell strategy in LCVs. Obviously, you're looking to have market leadership, but 2 questions on this. Firstly, by introducing fuel cell, are you not adding incremental complexity back into the powertrain by essentially having another powertrain derivative? And also when we look at fuel cell, there are several third-party studies that suggest that from a cradle-to-grave perspective, fuel cell has a higher CO2 footprint than battery electric vehicles. So in this context, is fuel cell the right strategy to decarbonize your overall footprint?

On the margin -- thanks for the question. Yes, you're right. Historically, RCI, the difference between operating margin and auto operating margin was between 1.5 and 2 points of difference. So if you do the same calculation, you would come to something around. But again, it's a floor, it's a floor. First, RCI, we took also cautious assumption because of the cost of risk and the environment. But again, this is a floor. So our ambition is clearly to do more, but this is a calculation that makes sense.

On the LCV, I think I speak under the control of Gilles. But on the LCV and fuel cell, I think we have the answer. You were asking whether this thing will bring us complexity. The way we see fuel cell integration in LCVs is basically with the idea of a range extender, which is an electric battery car with an engine, okay? So the basic car is the electric LCVs that we were planning. We already sell in the market. The next generation will be fitted obviously with the new technology. But it doesn't bring complexity, but it's a solution because looking ahead into the development of the regulation, we really fear that the life of diesel engines also for commercial vehicles will be in danger. So the ability that we might have to be very quickly on the market with the new hydrogen range extender solution, it's actually the way for us to pass the CO2 and to offer a solution for long-hail transportation in intercity. I don't know if you know, but Renault is already with a fuel cell offering in the market. So it's not something new to us. We know how to integrate the stack. The project with Plug Power goes beyond the product itself. And then I answer to your second question. Because, as I said, the uniqueness of the Plug Power approach with Renault will be that we don't only take probably one of the best stack in the market, we will integrate it with our experience in the product, but we will also take care and offer full-fledged solution to consumer, maybe big fleets that want to buy the charging infrastructure. And we will integrate in our business case also the production of decarbonized hydrogen. Why we think we have an advantage because we are in France. And with the energy mix behind the whole French ecosystem, we think we can produce at good cost, decarbonized hydrogen, and that will contribute to the whole story and to the CO2 reduction.

I wanted to add...

[Foreign Language]

I wanted to add something on the margins that I did mention in the speech, but I wanted to reemphasize. Don't forget that we have a big impact from, again, higher depreciation linked to the investment in the past and the lower capitalization ratio, which combined with lower expense in R&D, the amortization plus capitalization ratio has a huge impact on our operating margin in the tune of between 20 and 23, maybe 1 point or something like that. But -- so it's true that the progression on the operating margin may not seem high, even though, again, it's a floor. But the progression on the EBITDA is a lot faster. So that's what I wanted to tell you. And we probably are 1 year ahead in terms of reaching what we have done in the past. When you look at the EBITDA level, versus what you have on the automotive margin, we're paying the heavy investment of the past. And that's why we're a lot more confident to announce big numbers on free cash flow because here, you see the whole benefit of everything we're doing in terms of increasing the operating margin and reducing the R&D and CapEx level. And what you saw on the slide was really that for the first time since quite a few years, our cash flow generation from the operation is able to cover investment as any company should be in a position to do. So that's the point I wanted to mention because I think it's very important when you're going to do your model, not to focus only on operating margin. Again, we have the burden of the past that really focusing on the progression of the EBITDA that you're going to be calculating yourself on your model.

There is also one thing which -- I don't know if the mic is on, but another thing which we need to underline is that with the new product plan where we try to defend our position on small cars. And then we inject a very good, let's say, line-up of product on the different brands on the C segment. You actually make the whole thing more balanced because we were on 70% of our margins on basically 1 platform, okay? So industrial, but also from a business point of view, we will be facing a situation in 2025 in a positive way that we haven't had for many, many years. So it makes the whole thing at least -- we are at least on 2 legs, okay? And this is very, very important stories.

Next question is from Arndt Ellinghorst from Bernstein.

The first question is on consolidation and how the industry will shape out. Look at -- we've talked about industry consolidation for a long time. But so far, it's largely been within the auto industry. I think it's very likely that in the next 10 years, there's a lot of tech entering the space. We see Baidu talking to Geely, Apple to Hyundai, God knows what Tesla does with its $800 billion equity. But in a world where tech entered the traditional auto manufacturing field, a, how do you see the industry shaping out? And b, which role do you think that Renault should play? Would you be open to collaboration with a tech company? And secondly and more briefly, on Mobilize, Clotilde, you mentioned 20% of group revenues by 2030, that's a very big call. And other companies clearly step away from ride hailing, car sharing activities and focus on electric and connectivity. Why is Renault still in that area? It's very hard to earn any money, even if you make 20% of your revenues in there, it's very unclear to us, at least, how you're going to generate good return on capital employed in that area. So I'm a bit surprised that you still have this relatively strong focus on some of the -- especially car sharing activities.

I go for it. Hello, Arndt. I want to tell you that for sure, we are open, and you see it in some of the states that we are making. When you look at the Software République, is about bringing together, let's say, company from different sectors, from infrastructure, energy, deep tech company to work for us. And in exchange, we can offer a lot of things to these people. We have had so many discussions, even in the space of shared mobility where we understand that, let's say, they need us, especially for some of the things, for the control and the presence on the field, but also for the vehicle integrated. This is exactly the Mobilize thing. This is why I believe that Mobilize will work is that you have an engineering team behind. You have a design team behind, and you plug it with the bank with the possibility of financing the fleet, et cetera. So for me, Software République and the Mobilize story, the circular economy thing about [indiscernible], the story of Plug Power and, let's say, the hydrogen story, the thing that we've going in Renault tells you the vision we have. It's an integration, and it's a company that turns into a much more tech company than it used to be in the last years. And that's what we see it clearly. So we are very open. I also consider that we have unique assets, and I'll leave it then to Clotilde, who was in charge of bringing the 20% in 10 years of turnover. But we really have unique assets to make the shared mobility business or the new mobility business, in a way, not dilutive, okay? We are not betting on making money next year. So we have been also there very, very prudent. But please don't reduce the whole story of new mobility to car sharing. I mean, that's a little bit limiting the scope of the thing. We have a lot of things. You have energy, you have data, you have -- go ahead.

So yes, maybe I can bump on that. And then you can talk maybe more in on the consolidation. But on Mobilize, yes, 20%. First, it includes many things. It includes RCI. It includes everything we're going to do on leasing. Don't -- yes, as Luca said...

Subscription.

Subscription. Today, more and more people don't want to buy a car. They want to lease a car at best. And then in many cases, they want us to pay for the ride and for the kilometers they want. They want to go to subscription. They want flexibility. They want to be able to get out of their contracts whenever they want or they want to change cars. All of that is embedded in Mobilize. So you have the RCI turnover, everything we could do in leasing, together alone with RCI, with other companies, everything we do on the energy front, everything we would do in terms of data monetization. So it's a big number, and it's in 10 years. What we wanted to say was this 20% is Renault is looking at the future. If we stick to the usual model, waiting for people to be 55-year-olds to buy a car and get financed by the bank, I mean, we know that in 10 years, it's not what it's going to be. It's turning to very different model. Many, many people don't want to own the car anymore. So we encompass everything of that in Mobilize, saying, this is where we want to play. We want to make sure that by focusing on today what we're doing, we don't forget the future. Now a few more things. But we would nevertheless want to go in car sharing. As I said, we have found a way not to be losing money on that staff. But you know me, I'm the CFO. And I think it's no surprise if Luca put me on that job, because he knows that I'm not going to spend billions and losing money, I would not sustain that as a CFO. So the combination of my knowledge of what RCI is doing, my role as CFO and Mobilize is to make sure that we look at the future, but we don't burn money, and we don't forget the return on capital employed.

Luca, do you want to add something on the consolidation of the industry?

I mean, consolidation is everybody, there are different opinions. I think it's an issue that for us, it's behind since many, many years with the Alliance. So our focus as a team is to make sure that we can really leverage the potential and the reach that the Alliance gives us. I think that the fact that Kato San and Uchida San were today at the presentation is a very symbolic act, which -- for which I want to thank them because it gives everybody a feeling that we're working together, trying to solve operational issues, try to, let's say, to make sure that we can leverage all the possibilities the Alliance give us. There is still a lot of potential. And it work -- is working well. Unfortunately, we cannot travel too much to Japan. That's a pity, and they cannot travel to Europe. So hopefully, this thing is out and then we can shake hands and continue to work as we're doing.

Next question is from Jos Asumendi from JPMorgan.

Just maybe a couple of items. Can you -- I mean, there are some big numbers on Dacia, right? I mean you're going from 4 to 1 architectures, you've got 85% carryover products, you're doing a double-digit price increase. I mean it's -- I think, very interesting to see how much progress there is still to be done on Dacia on a brand that's already driving very strong returns. So can you talk a little bit about this CMF-B architecture? How is it going to play a role to leverage the resources of Dacia with the group? Can you talk a little bit about the momentum on when does Dacia really gain much further incremental volumes on the architecture? And then I'm very interested around the price increases. Is this product mix related? Are we going to have some additional product launches that are going to upscale the brand into a different level? That will be very helpful to understand. And then second question, please, around the key actions behind the upping of the fixed cost savings to the level of EUR 2.5 billion. What is making you more confident within the different buckets you have in fixed cost? What do you think is going on track? And what has already been achieved and you think you can overachieve? Final question on pricing. Luca, can you talk a little bit around also, please, the incentivization or the relations with the dealers across Europe, do they understand that Renault is moving from -- is going to be much more targeted in terms of the segments? We're not looking at volume targets. And do we understand the right level of mix to incentivize going forward? And I believe you've been doing a lot of work on that field as well.

[Foreign Language]

Yes. Thank you for your question. I hope the microphone is working. Yes. On the CMF-B, I mean, the presentation, I think, was very simple, is the fact that we are going to have 2 new levels of synergy at the Lada and Dacia brand. One is technical engineering one, production one, which is the introduction of the CMF-B. CMF-B is a brand new platform. Of course, it's the same as we're already using for the Clios and the Capturs, but that has been reengineered on design to cost. Proof point is the Sandero that we are being launching right now on this platform starting less than EUR 9,000 at an entry price. So we did the job already and recognized by the press on the platform. And this will be the first lever. It will be applied to Lada, and that is why we are going to switch from 4 to 1 platform is when you put together all the Dacia model and all the Lada model, they're going to be coming back on 1 platform. This is also the second lever that you talked about and that we presented. The CMF-B platform will permit us to tap the C segment. And the car that you just saw, the Bigster, is designed on this very platform that is being shared between the Sandero up to the C segment SUV. And finishing on -- and your question, how does the portfolio will increase gradually. We're just starting exactly right now with the Sandero, Sandero's takeaway in the market. We're going to be adding to the range of the Dacia product this spring the full new -- the full electric new car called Spring. And of course, these 2 cars are going to arrive further down the road, the SUVs based on the CMF-B platform.

I can make an, let's say, addendum to what Denis said. This is probably the -- what we call [ P13x ], it's probably the one of the smartest projects we have in the whole house. We are doing 7 models across 3 brands in 3 or 4, let's say, production location on the planet. For what, how many per year, if you include everything 1...

This model is going to be more than 0.5 million is going to be 700,000. Just on this model.

Yes, exactly. So with 85% of carry across, which is -- so this is probably one of the most interesting projects we have in the whole plant, of the many. One thing I want to underline, Jose, is that this car will also be used on an international base with the Renault version. It's very important to say because it will support the repositioning of Renault upwards and think about Latin American, et cetera, et cetera, where -- because we -- as I said in the presentation, in some cases, we're too low into the thing. We deserve more. We deserve to be in the core of the market. So we will use this base also to do renovation, but it was designed and imagined as a Dacia first. And then we had the idea of resurrecting the Niva brands to make it the very technical product, also fit for export and fit for some extreme utilization, but it's a very good project for me. Yes, sorry.

Luca, do you want to answer the question about the price?

Yes. Look, I think we have already seen some very strong signs. As I mentioned in the presentation, I was even personally surprised, but I think that it went so fast. I think that people understood what I meant when I was talking to the commercial guys. And Denis was the head of the tribe. So they switch very, very quickly. We gained 5.5 points net pricing in 1 quarter. I'm not going to -- let's say, tell you that I do more than 20 in 1 year. So I think it's -- but I have to say that by the end of 2020, it's getting better. And also because we made some, for example, decision, it will continue in 2021. This -- one of my objective was to close the gap to our benchmark in terms of pricing. I think we're going to get there. We are doing -- you can see -- look at a lot of -- as you like numbers, obviously, you can look at, for example, how we behave with the lending in -- at the end of 2020. How much stock we have into the thing, whether we have pushed stock, and you will see that there are already a lot of concrete signs that we are changing policy towards our dealer. Do the dealer understand that? They will see the presentation live. There probably is a lot of them seeing that. We will have a discussion. I think if it's not today, it's tomorrow with them. So we're starting to pass this message. But the teams in the markets have already engaged in discussion on how to change the reward policies for dealers because we want them to make money because we know that if they make money, we will make money. And I'm very clear on that. I've always been in all the companies I've worked. So I think we can -- together, we can do it. I mean, you have to understand that. The Renault is one of the company that was the top-notch university on sales and marketing, okay? So the base is there. And we're going to come back, and we're going to be very, very good in our go-to-market for our consumer and for our dealer partners.

On the fixed cost, I may take it. As we told you during the Q3 call, we were going faster than anticipated. And you will see that in the numbers in a month when we will publish the 2020 numbers for 2020. As Luca mentioned, we are going faster than anticipated. What is going very, very well is engineering. Gilles has done a tremendous work in engineering in order to rationalize what we spend, on what we spend it and how we spend it. And...

Also on process engineering.

And also on process engineering. Thank you, Luca. So the whole engineering portion is going very fast versus what was anticipated. You know that we have negotiated the voluntary departure plan with the unions just before summer. So yes, between summer and Christmas and now it's open for people to start to leave. So everything is going well. And we don't see any roadblock for the moment. And Luca mentioned, we want to go faster than the end of 2022, moving it back as much as possible through the year and if possibly, even this year. And you have seen also that we are now extending the cost reduction plan for what we expect by 2023 and by 2025. So this is working pretty well. And you'll see the impact actually on the breakeven point. The mix between the cost reduction and the increase in pricing and margining per car is exactly the reason why we are able to have such a drastic reduction in breakeven point already in 2021.

As time is flying, I will kindly request you to limit your number of questions to two, if possible.

Next question from Dorothee Cresswell from Exane.

My first question is around the BEV profitability. Your BEV profitability assumptions are pretty impressive. And I'm just wondering what's driving that. So could you share your battery cost assumptions, the pricing assumptions relative to ICE? And maybe also any assumptions you've made when it comes to BEV subsidies? And then my second question is around the possible upside from partnerships, which you say is not reflected in your profitability target. Could you give us a little more color around the potential benefit on that front? And maybe even some numbers?

I'm not sure I will be able to fully answer all those questions. I'm sorry for that. I hate that, but I hate to not answering. But let's say, what I can say on the on the profitability of EVs, it's like coming into Renault, you understand that we have long experience. We started very early. Of course, the company for a while gave up on that, but then we are back on focusing on EV. The fact that next year, we'll be launching the platform with the Alliance platfrom CMF-EV, this is a great base, though this is -- and I have seen other C segment platforms in my past. So I think we have really very, very strong asset, okay? What I can tell you about is the experience we have right now with the Spring, which is the cheapest, let's say, most affordable, let's go like this, EV car in the European market, which is, I think, a very, very clearly positioned car. And then, of course, we have 10 years of ZOE. And in the ZOE case, we reduced the cost of battery by half. We know that we are making, in absolute terms, more margin than we do on, for example, a comparable Clio, just to give you -- and the Clio is also profitable car for us. The EVs are still dilutive, but we expect that coming with the new platforms, for example, with that car and change in chemistry, okay, we will be able to also, from a percentage point of view, maybe 24%, 25% or something like this, get to a percentage in profitability that is similar. There is another kind of urban legend about electric cars. About the impact that this thing has on aftersales business. So I asked the question and I look into the numbers. And in fact, what happens on the ZOE case is that because people are more loyal to the workshops in electric cars, we are actually making more business with ZOE on aftersales than we do in a normal car. So I mean it's a revolution, it's a discontinuity. We'll have to find our way to do the business, but there are some opportunities. I'm not going to comment on the on the cost of the battery. I mean, you know the -- what the other people say, what is the level that will make such kind of products competitive. So of course, we are fighting. Of course, we have very strong knowledge also on the supplier side with the Vronique team, and we will try to get the best, let's say, cost of battery because we have a very long relation with some of our suppliers. So I think even on that one, we have a clear advantage that if we are able to communalize our technology with the Alliance, it is possible that this Alliance will get above the 1 million car per year sold on to platform on EV. And that puts us really in the final of Champions League, and we'll have definitely an impact of the cost. The subsidies thing, we make a kind of, let's say, of incremental, let's say, dilution of subsidies, maybe a 20% for years, an assumption from now to 2025. But I think that if I look at the latest discussion on the green deal coming, for example, in the European perimeter, all government will be very motivated to push on that side. But my personal view on the thing is that subsidies are excellent, obviously, to boost the demand to hit the targets, et cetera. But I think we should -- probably should put more money on the higher part of the value chain, for example, in infrastructure to make possible that the people can, let's say, charge their cars. We know how to do electric cars. We will have them in the market. We need to make sure that we facilitate the charging of this thing, that would be a priority or -- yes. On the partnership side, I mean, it's too open as a question, and I can not...

Yes. The only thing I -- it's very open. It will take time because any type of partnership that you do today will take a few years before it comes in your P&L. And that's why we've been prudent. That being said, just take back the numbers in the past. What we've been -- at some point of time partnership was 20% of our turnover, 15% to 20% of our turnover. Today, it's very low. But if it comes back and comes back big, it can have a big impact, depending on what partnership we're talking about. That is too broad as...

Yes. I think -- if I may, I take advantage of this question to say that we have -- I think we have a lot of potential to work, for example, with Mitsubishi and Nissan and vice versa so that we can find solution and open some fundamental project with them. This is the spirit in which we are engaged. That will have an effect, but it's not actually considered in the plan. So we stay at the level of today, but there are -- we are already discussing some opportunities. And we have -- if you look at the presentation, we have already announced a few partnerships during the presentation, which we have worked in the last weeks. Think about the Lotus. We are very proud of it or the Plug Power story or the fact that you have companies like [ Orange ] or STMicroelectronics or Atos with us. So we are very open to that, but give us the time and -- but as a basic assumption, we don't put that into the numbers until we don't know that it's feasible and that it can actually have an impact on our numbers. I think it's fair in terms of position.

Next question from Charles Coldicott from Redburn.

My first one was actually on your volume assumptions. So if I look at Slide 27, for example, which has your production and capacity utilization, you can sort of deduce that you're expecting to get back to maybe 3.5 million units in 2023. It is up about 16% versus 2020. But I know there's a comment later that you're expecting the main markets that you sell-in to increase, I think, 25% over the next 3 years. Obviously, you're focusing on value over volume. But I was just wondering if you can comment maybe on your thoughts on market share loss over the next 3 years, as you focus on increasing the price point. And then my second question was just going to be on the dividend policy. Obviously, historically, there was a policy to pass on any dividends you received from Nissan, is there any update on that? And also on thoughts on future dividends, given the strong free cash flow targets you talked about? And also -- sorry, just finally, as you mentioned that your free cash flow includes dividends from RCI. What are you assuming for that over the next -- from 2021 to 2023?

On the volume, yes, you make the deduction that you want on our slide, that's your role, I guess. But what -- remember what I said in terms of volume assumption, we said that the emerging market would come back to the 2019 pre-COVID situation by 2023. But that the Europe will not come back to pre-COVID before 2025 and beyond. So in view of where we spend, when we sell our cars...

This is our assumption we put in here.

That's our assumption we do. And -- but we didn't forecast any big loss of market share, no. We're just following the market, but reorienting to the more contributing product and channel than what we were doing before. So in terms of volume, as you said...

You should calculate the share of wallet.

Yes, lion's share of market. So -- but so that's it. So market share, no big loss, just reorientation, more retail less fleet and more where it makes money and makes sense versus other things. But again, the assumption is that the European market is not back to where it was before 2025. If it goes faster, then it's double money for us because that's where we make the most money and where we have the cars which are coming in. In terms of dividend policy, clearly, we understand and we agree that we have to give a return to our shareholders. We know our duty, and we'll fulfill it. But in view of the current situation, I think we will first and foremost favor returning to net cash position positive. It's what we need to do. And this will come according to the plan that we have today. But after that, obviously, we will go back to dividend policy. And in terms of the Nissan, we could come earlier back to dividend payments versus our cash position, depending on the Nissan speed of recovery. If Nissan goes faster, obviously, there will be more availability to pay a dividend to our shareholders. Is there going to be an automatic pass-through? I don't know. I can't promise because it will really depend. We're going to have to make arbitrage between what we pass on to their shareholder and what we use in order to restore our net cash position. Your last question was on the free cash flow, which include RCI. Obviously, I'm not going to give you a number. What I can tell you is that RCI position in terms of capital structure is pretty good, very solid. And we have more capital than what the requirements of European Central Bank is currently when we look at the numbers. You know that we have not been able to pay the last portion of the 2019 dividend. So as soon as the European Central Bank is less strict on what we can deliver as a dividend, obviously, we'll have to come back to that. We have really sufficient capital structure in order to pay more dividend than what we used to pay in the past, but we will never put RCI at risk. We will always respect the capital requirement from the ECB, but we have a big potential in that field.

Thank you. It's already 11 a.m. Paris Time, but I guess that we'll accept to have a couple of extra questions, but please keep only 1 -- yourself to only 1 question.

Next question from Stephen Reitman from Societe Gen.

My question is also about the plan, about the resurrection part of the plan. And that is what do you expect in terms of labor cost, when you benchmark yourself, one of the key parts of the PSAs back in the res plan was reducing labor cost and also reducing inventory levels. So you can maybe give some details on that, please?

Well, on labor costs, we're not going to give you a number, but basically everything we're doing in terms of reducing our fixed cost, the portion is not labor, but a big portion is labor, and that's the reason why we have made the announcement we made in -- I made actually in the month of May. So by 2023, we don't have much more than what we have announced. And this is a big way of working on the labor cost to call back to where we were before and even lower and closer to benchmark. Currently, it's true that in the last year, it went up. In terms of inventory, we have -- do you want to say a word, maybe, Luca, on your...

No. I think -- no, I want to rebound on the story of the labor cost. I think the reality is that and this is what I mentioned also before. A big part of the company, the level of competitiveness we have on this KPI is very, very strong. I see, when, I look at the numbers now, probably we have a lot of plans that are unutilized with the -- so we have to do 2 things, which we're doing with Jose-Vicente and then the Plug and the industry team to rightsize those plants. And of course, to fill the plants with the products that we have in mind that are -- most of them or basically all of them are based on platforms that are already industrialized and localized, okay? So it will very quickly go to a level of, let's say, utilization rate, which is more than decent, okay? And this will solve the problem. It's not about only cutting jobs, which is something we don't necessarily like to do because we are also here to protect the work of the people. This plan is for -- is done for the -- also for the people of Renault, and I want to underline this thing. So we have to do a lot of things to protect this and be efficient. And with the team, we have some good ideas on how to solve issues in the past and bring the whole top of costs and industrial costs, et cetera, to the level that we need. On the stocks, I think we came out better than I actually asked you, Denis. So I think we were 20% down by the end 2020, 486,000 cars. So you see that I focus on this volume. It's a very good sign, because it means that we start the year lean with a portfolio that was -- it's almost at the level that I expect, which was around 1.8...

Plus 15% from the portfolio.

Plus 15%, yes, so it's 15% more than last year. So I think the way we manage the transition, 2020, 2021 from a commercial point of view, is good. And we continue to work on that. We want to reduce in the medium term, the stock by substantially. So I can give the target, but we want to reduce the stock by 30%. And -- but to do that, we need to complete the restructure, reengineer, let's say, the supply chain. There is a project in the house that we are doing with Jose-Vicente and his team to really make of supply chain, not, let's say, a really competitive lever rather than just a cost center. We will talk about that in the next years. I think you can expect Renault to be pretty advanced in this field. And the ultimate aim of this project is actually to reduce working capital and mobilization of the capital. And I think we can show you very, very quickly where we're going on this front.

Yes. We already talked to you about that in the first part of Luca's event in Q3. The motto now in the company is more than 2 months of the portfolio less than 2 months of stock. And I think Luca was quite impressed about our rapidity to get there. As we achieve that in some of the months, not every month, but it's really getting there.

So we have time for very last question. At least it is only one question.

Last question from Horst Schneider from Bank of America.

Yes. But I would have, again, 5 questions, but I have to cut myself to 1. Just to follow -- yes. Yes, yes, sure. Sure. Just to follow up on the statement on inventories that was very interesting. So is the conclusion right that your free cash flow target by 2023 is also impacted by the fact that you had a very good working capital development basically in H2 '20, which basically limits the working capital improvement going forward? Is that the right conclusion? And coming back again to the Q3 statements on the conference call, I guess that Q4 then was better than your original expectations. Is that right?

Well, I'm not going to comment on Q4, guys. I mean, you know the rule of the game, so I'll comment on Q4 in a month, right? Sorry about that. But you're right, we -- obviously, everything which would have been cut back in 2020 H2, we will not get it back afterwards. But the fact that the working capital improvement is not that big, actually, it's not that small either, is also because we were cautious on volume. And you very much know that the working capital is linked to the volume development. But what is important is, in our view, the working capital recovery will cover restructuring cost. And that is very important because I know it was one of your concern. When you presented the 2022 plan in May, you say, how are you going to pay for the restructuring you need to do? And the fact is we have the plan in order to do so. So generate free cash flow even because this free cash flow is covering restructuring, clearly. So that's a big important thing to keep in mind. This is after restructuring. So we have plenty of ideas in order to improve the working -- the free cash flow and get to these numbers.

Okay. Thank you. So as you have understood, we have a run de vu on the 19th of February for commenting on Fiscal Year '20 numbers. So I think it's time to close the Q&A session. Thank you for being with us this morning. And of course, as usual, the IR team is available if you have other questions that have not been addressed this morning. Thank you, and see you soon. Bye. Thank you.