Renault SA (RNO) Earnings Call Transcript & Summary

Good morning, everyone. We are pleased to welcome you for the 2021 full year results of Renault Group. This presentation will be made by Luca de Meo, CEO of Renault Group; and Clotilde Delbos, Deputy CEO and CFO. This presentation is broadcast live and will be followed by a Q&A session. Luca, the floor is yours.

Thank you, Philippine. Hello, everyone. Thank you for being with us today physically or virtually. I am very pleased to present to you our 2021 results. I think it's a very special day for the Renault Group. One year ago, as you remember, we reported historical losses. And today, we're able to show you results that probably a few would have expected from us. So when you look at the numbers, you can see that we exceeded our Renaulution 2021 consensus. We are also at least one year in advance on most of our objectives, namely, our profitability reached 3.6%, which is above our previous or is our 2023 guidance. We also generated EUR 1.3 billion of free cash flow. And our investment level is now on track. In terms of percentage, we are around -- so we are within the bracket of 8.9%, precisely 8.5%. We overshot our EUR 2 billion fixed cost reduction objective. And finally, we reduced our cash breakeven point by 40%, which is a more -- actually more than two years ahead of our schedule. We achieved all of that despite a very, very challenging environment, pandemics, semiconductor crisis and inflation, you name it. So I want to take the opportunity to thank all Renault Group's employees, as well as our dealers, our suppliers, our shareholders and big thanks also obviously, to our customers that finally are the ones that pay our salary. All this is the result, I think, of titanic work. In the last 18 months, we implemented what I consider being a structural transformation concentrated on 6 fields: First one was about setting up an agile organization, a modern organization; second, securing commercial success; focusing on value; reducing the cost, you've seen it; restarting the alliance, we had a chance a few weeks ago to show a new spirit within our partnership with Nissan and Mitsubishi; and finally, defining an ambition, an ambitious sustainability strategy that we presented in the General Assembly in April 2021. So let's start with our organization. To make it simple, we reoriented that towards the market. We reorganized the group around 4 customer-oriented brands with clear territories. Now each brand is responsible for its commercial contribution and return on capital invested. And on top of that, we place customer satisfaction as a core driver of all our activity. We went further than that, promoting also a new mindset. First, we needed a best-in-class management team. So what happened is that we actually promoted 250 managers to the group top 1,000. So a lot of new people in the management, 30 of them were strategic hires from high-level companies. And of these new hirings, I'm very proud to say that 50% are women, so we can attract female talent to the automotive industry, which is a very good news. In addition to that, we're building a flatter and faster organization. We increased the span of control by 10%. And in 2022, we target to increase it by more additional 10%. In the engineering, for example, under the leadership of Gilles Le Borgne, we have converted 30% of the management position to exports position since the beginning of 2020. All the cars that we have launched were actually above our expectations. Example, Arkana is a success, more than 60,000 orders in 2021, that's above our internal target. 60% of sales of this car are into the retail channel and more than 60% of the mix of Arkana is on hybrid. So we are -- we achieved very, very high level hybrid comparable to the one of some of the historical leaders in this technology. The new Kangoo was awarded van of the year 2022. And in addition to that, our leadership in Europe was confirmed on the LCV van market with a share of 16%. For Dacia, Dacia is a great success. You have the boss Denis Le Vot. Sandero remains #1 in the retail market in Europe since 2017, with 226,000 sales for the whole range. And Dacia Spring is also good success or great success with 46,000 orders since its launch in spring of 2021. If you look also at smaller business that we have like the Alpine, the launch of the A110S version supported its commercial success and the sales of Alpine also thanks to the exposure to the Formula One up 74%. At last, I just want to mention that our order book is above 3 months of sales, and this is a 15-year high and not only originated by the lack of components and products, but because people are ordering our cars. I want to point out the success of the E-TECH technology for us, E-TECH is a hybrid, plug-in hybrid plus the pure electric lineup. It's -- everything is in line with our long-term Renaulution target. The volume of the E-TECH cars sold has grown by more than 50% since the 2020. And as a result, almost 1/3 of our passenger car sales are already electrified. What is important to mention here that actually we approved in 2021 that we could we have already succeeded in replacing diesel by hybrid at Renault. So let's continue with our commercial policy. We transformed it's in depth as we promised. First, we have reduced the new models diversity, technically and commercially by almost 40%, 38% to be precise, which is massive. We also improved our product mix. In Europe, the brand E-TECH mix, as I mentioned before, rose by 10 points versus H1 2021 from 26% to 36%, and the trend is actually growing. C segment passenger car sales now represent 1/4 of our sales. It is consistent with the ambition to align our mix with the arrival of cars like the Mégane, the Austral, the Jogger and the one that will come to the level and to the mix of our competitors, very important for our profitability and capacity of generating cash. The same is true about our channel mix. In H2, retail accounts for 50% of Renault brands, total sales, up 10 points, which means that we are in line with a mix. And it was actually almost 2/3 in the last part of the year. So trend is growing. Dacia is the #3 in Europe on the PC retail segment. So #3 brand, when you look at only the retail, which is also, I think, a very good result and congratulations to the Denis and the team. At last, for our new models. This is a reflection of our -- of the quality of the work that we've done on the product and the commercial policy, high-end version now make up between 65% and 85% of the mix. So we are pushing up the mix within each one of the mold range. As a result, our net pricing was improved by almost 6 points versus 2020. And this new policy, as you remember, has already started like in Q3 2020. I think it explains a part of the jump in profitability. We made it, as I mentioned at the beginning, much faster and stronger than expected. We reduced our cash fixed cost by EUR 2.3 billion, of which EUR 2 billion are structural. This was 1 year ahead of our schedule because the target was set for the end of 2022. We also reduced our cash breakeven point by 40%. And remember that our target was 30% by 2023 and not 2021. In addition to that, the cash research and development CapEx per vehicle was reduced by 40% for the new models. So thank you Gilles and the engineering team for what we have done. It means that today, we almost do 2 cars for the price of 1 before. And finally, we reduced the development time by 25%, moving from 4 to 3 years. We are also now, I think, in a much better cooperation mode within the alliance. We work to find together a solution to our next challenges. To start with, we clarify the alliance governance. We also defined a clear sharing of activities between the 3 companies to optimize the allocation of resources. Our road map is now very, very clear. Let me only mention a few examples. First, we have a common electrification strategy, EUR 23 billion of investment in the coming 5 years, in addition to the EUR 10 billion that we already invested because, as you know, we started pretty early with electrification within the alliance, both Nissan and Renault. Our battery strategy includes mass production -- mass producing all solid state batteries by 2028. In addition to that, altogether, we will launch 35 full EV vehicles by the end of this decade. By 2025, with the addition of the CMFB-EV platform, so the small electric platform developed by Renault, the alliance will have an unmatched set of electric platforms covering all volume market segments globally. And finally, by 2026, up to 80% of all the alliance volumes will be carried by common platform against 60% in 2021. In 2021, we also set new foundations and new ambitions for our sustainability strategy. It is now embedded within the renaulution. It is, in my opinion, a pragmatic KPI-driven set with short, mid- and long-term clear objectives. We committed to carbon neutrality in Europe by 2040 and globally by 2050. And to get there, we use all the levers covering the entire life cycle from cradle to grave. In the circular economy, we are today recognized also by peers as a frontrunner. The refractory shows our ambition. We plan to generate EUR 1 billion of revenues from circular economy by 2030. We'll also repair about 20,000 batteries and 120,000 vehicles on a yearly basis by then. And we will reinject up to 80% of the minerals recycled from end-of-life batteries into new ones. We are not doing this alone. We created a robust ecosystem of partners all along the electric value chain. As an example, our partnership with Envision AESC, for Douai and Verkor supports our goal of equipping our vehicles with low-carbon batteries made in Europe. To close this chapter, let me confirm that we reached, we think, because this has to be, of course, confirmed by the European community authorities. We reached our 2021 CAFE target, and I would say also with a relatively comfortable margin. Being a responsible employer, it's a bit of a tradition of the house and is another pillar of our sustainability strategy. We take our responsibilities to accompany the shift of our workforces towards the future automotive value chain. We do it with the Renault University, one of the highest or biggest reskilling projects in Europe. Our goal is pretty ambitious, training 10,000 people by 2025. In 2021, we already trained 2,600 Renault employees. So we are on track to achieve the target. We also strive for equality and boost women empowerment. So we reduced the gender pay gap from 7% in 2017 to 1.7% in 2021, and we commit to reduce it to 0 in 2025. In the group's top management, we are aiming for 30% women in 2030, 35% women in 2035 and 50% women in 2050. So it's pretty simple to understand. At last we are transforming the group while staying true to our history of social dialogue. We signed 4 major long-term trade union agreements last year in France, in Brazil and in Spain, all without any social tension. As you can see from this chart, ESG and our sustainability strategy are now integrated in the Renaulution dashboard and fully embedded in the execution of our performance. The bottom line of all of this is pretty simple. We are achieving one of the fastest turnarounds in the recent history of the automotive industry. The figures presented by Clotilde will show it to you. If you compare the situation to what it was 1 year ago, just 1 year ago, it is fair to say that something a little bit magic as is happening at Renault. And we'll see actually much more happening in the month and in the years to come. So I'll give the floor to Clotilde and come back in a few minutes.

Thank you, Luca, and good morning, everyone. It is with some emotion that I will present to you today the financial results for the year 2021. Indeed, after 6 exciting years as CFO, I have decided to hand over the rein of finance to Thierry Piéton, which is here with us, with whom has been the deputy CFO since 2 years. Thierry is a man of great talent. And he has many professional qualities behind his competencies, which are already very useful to the group management team and that we are forming around Luca. This change will allow me to devote myself mostly to the development of the mobilized brand with a simple goal creating around RCI, a new generation car and mobility brand that aims at generating 1/5 of Renault Group's revenue by 2030. I will indeed invite you in a few weeks for Mobilize's first Investor Day to disclose in more details Mobilize's strategy. I will obviously continue to work intensely with Luca and all the management team to drive Renault Group, this great company, to the success it deserves. But now let's go back to Renault Group 2021 financial statements. So I will give you first a brief overview of our 2021 sales. In 2021, Renault Group sold 2.7 million vehicles, down 4.5% compared to 2020. As you know, in the frame of our strategic plan, Renaulution, we have changed our commercial parting and favored the quality of our business, meaning value over volume. This led us to give up some market share. And when you add a total chip shortage impact of 500,000 units on our 2021 production output, you have the explanation of this performance. I also would like to stress that the market has still not yet recovered to compare to 2019 with, for example, volumes in Europe remaining more than 23% below 2019 level. In Europe, our 2021 registration declined by 6.2%. The market was stable for the year with a depressed market in the second half, down 22% on the last year. The group performed in line with the market in H2. International markets have performed better than Europe and Renault Group posted a 2.4% decrease. Our sales increased in Russia, our second biggest market and in India, taking advantage of the launch of Kadjar. By brand, Renault underperformed the group losing 5.3% compared to 2020, while Dacia and Lada made progress. It is worth noting the strong performance of the LCV business, up 12% on above market. I will now turn to the financial review. On Slide 20, we show the revenue contribution by activity. Group revenue for the year was up 6.3% compared to 2020. At constant scope and exchange rates, it increased by 8%. Automotive revenue, excluding AVTOVAZ, increased by 7.1% to more than EUR 40 billion. AVTOVAZ contributed for EUR 2.8 billion, up 10.4%, partly explained by strong price increases and product mix for the 18 points, which have more than compensated the 6.8% ForEx devaluation. Excluding ForEx, AVTOVAZ revenue were up 17.2%. Mobility services contribution amounted to EUR 24 million for the year. And our captive finance company, RCI posted revenues of EUR 2.9 billion, down 6.5% due to the decrease of the average performing assets, stemming mostly from the group's strategy to optimize the network inventories. I will now review the breakdown of revenues for the automotive activity, excluding AVTOVAZ. The first item, foreign exchange was a negative 1.5 points on the full year, mainly related to the devaluation of the Turkish lira, the Argentinian peso, the Russian ruble and the Brazilian reais with an improvement in H2. The next item, market impacted positively for 4.4 points with a negative impact of 9.4 points in H2, notably due to the European market at minus 22%. The group's volume performance stood at minus 7.5 points with a 2-point improvement in H2 versus H1. As explained, this is the consequence of our strict commercial discipline, which has led us to give up some poor businesses and of the cheap shortage, which has prevented us to fully leverage the success of some of our models. The fruit of this policy can be seen in the 5.7 points of positive price effect. It shows how serious we are about improving the pricing of our cars, the quality of our business focused on the most profitable channel and our will to protect residual values. In H2, the price effect was up 3.6 points with a strong comparison base since this new policy was launched, as Luca said, in Q3 2020. The product mix effect yielded a positive impact of 2.2 points, thanks to the success of our new C Crossover, Arkana launched in Q2 2021, the continuing strong demand for LCVs and lower sales of some models with a lower revenue per unit than group average price. The last bucket, others, contributed positively for 5.3 points. This unusual high impact is coming from the recovery of the spare part business and from the decline of sales with buyback commitments, stemming both from the decrease in short-term rental sales and disposal of some owned dealer assets. I will now turn from automotive revenue to the group operating margin by its operating sector. The group operating result for the year was positive at EUR 1.7 billion or 3.6% of revenue, up EUR 2 billion versus 2020 and almost 1 point ahead of our guidance. Our group margin stood at 4.4% in H2 versus 2.8% in H1. I remind you that this performance has been reached with a loss of 500,000 units over the year due to the easy availability. The automotive segment, excluding AVTOVAZ, was positive at EUR 260 million, up EUR 1.7 billion versus 2020. AVTOVAZ operating margin was positive EUR 247 million with a strong H2 at 9.5% compared to H1 at 7.9%. Globally, the automotive activity posted a positive operating margin of EUR 507 million or 1.2% of automotive revenue, showing an improvement of EUR 1.8 billion over the previous year. H2 margin reached 2% versus 0.4% in H1, and Mobility Services reporting an operating loss of EUR 29 million. Our financing activity, RCI, delivered close to EUR 1.2 billion contribution to the group margin versus EUR 1 billion last year. Let's now look at the group operating margin variance elements. Renault Group's margin improved by EUR 2 billion in 2021 compared to 2020. As for the external factors, currency impact was slightly positive at EUR 8 million, with most of the currency recovering in H2 from H1. The Turkish lira continued to devaluate, but it has a positive effect on the cost side, thanks to our export production based in this country. Raw material was EUR 468 million headwind, strongly impacting H2 with minus EUR 392 million, reflecting the current trend of higher prices of raw material, particularly steel, aluminum and plastic. Then comes the volume impact from the market, which was a positive of EUR 0.3 billion for the full year. After H1 market recovery on last year's depressed level for EUR 0.6 billion, market posted a negative contribution of EUR 0.3 billion in H2. We have isolated the volume impact, not related to the market development, but to our own market share evolution and sales to partner. It is a negative of EUR 579 million, but as already explained in the revenue analysis, this does not come as a surprise to us and came from our commercial policy favoring volume over -- value sorry, over volume, lack of components and lower sales to our partners. The mix price enrichment impact was positive by EUR 1.127 billion and showed the strong benefit of this pricing policy and channel mix discipline in Europe and overseas. This impact includes price increases to cover exchange rate devaluation and cost inflation. It also reflects the success of Arkana launch. Productivity gains contributed for EUR 852 million, and I will give you more detail in a minute. AVTOVAZ increased in contribution by EUR 106 million, thanks to price increases, which have more than compensated the negative ForEx impact and raw material. I will comment RCI performance more in detail later in the presentation. So to finish this analysis, the last bucket named Others, contributed positively for EUR 483 million. The major contributors are parts and dealers, activity recovery, the impact of the retreatment of sales with buyback commitment that I mentioned before and some variation in nonrecurring items from 2020 to 2021. Productivity posted a gain of EUR 850 million, as I just said, but it's mainly coming from the purchasing and R&D performance. Warranty costs have increased by EUR 38 million. R&D showed a gain of EUR 217 million in the P&L, thanks to a strict cost management policy. Manufacturing and Logistics contributed EUR 69 million, thanks to productivity efforts and organization optimization. The change in amortization and capitalization ratio impacted positively for EUR 42 million as the negative impact of a lower capitalization ratio from 49.1 points in 2020 to 44.5 points in 2021 was compensated by lower amortization, notably due to 2020 impairments. Finally, support function G&A have been cut by EUR 21 million, reflecting our strict cost management. As Luca already told you, we have reduced our cash fixed cost by EUR 2 billion 1 year ahead of our schedule. Each function's contribution was in line with expectation. Engineering has optimized the use of subcontractors, reduced range and diversity, increased carryover of parts and prototypes cost reduction. Manufacturing benefited from convergent effect with the alliance, pushed for process standardization and optimization in support function and energy consumption. As for SG&A, we decreased, thanks to fixed marketing expense rationalization, labor cost reduction and cost optimization from the BU reorganization. As a result, the cash breakeven point was reduced by 40% in 2021 compared to 2019, 2 years ahead of target, reflecting mainly fixed cost reduction and net price improvement. RCI. RCI generated EUR 17.8 billion of new financing, up 0.4% when excluding ForEx impact, helped by the 7% increase of the average finance demand and by the strong performance of used vehicle financing contracts. Average performing assets amounted to EUR 44.8 billion, down 4.6%. This decrease is explained by the impact of the group strategy to optimize the network stocks. This led to a 23% average performing asset decrease related to the network business, which stood at EUR 7 billion for the year. RCI posted an operating profit of EUR 1.2 billion, up EUR 0.2 billion versus 2020 and almost back to 2019 level. This operating profit increase is explained by the cost of risk evolution, which strongly improved in 2021. It stood at 14 basis points of the average performing assets for the year versus 75 points at the end of 2020. This very low level versus normal level is explained by the improvement in risk parameters by return to normal recovery processes, which were impacted by the strict lockdowns last year and by the decrease in outstanding assets in the network. Now that we have covered the operating margin variance, I will continue down the P&L with the other operating income and expenses items on the Slide 27. Other operating income and expenses amounted to minus EUR 0.3 billion versus minus EUR 1.7 billion last year. Several items explain the strong improvement. The restructuring costs and provisions stood at minus EUR 430 million compared to minus EUR 600 million last year, with ongoing plans, notably in France. Impairments impacted for minus EUR 149 million after the exceptional minus EUR 762 million booked last year, which was mainly due to revised assumption and decision to discontinue some programs in the frame of Renaulution strategic plan. Disposal of assets led to a capital gain of EUR 487 million, mainly from the sale of some owned dealer branches as announced in our 2022 plan. Continuing down the P&L, the next item is net financial income and expenses on Slide 28. The net charge eased from minus EUR 482 million in 2020 to minus EUR 350 million in 2021. This improvement is mainly related to the accounting revision of the carrying value of the loan guaranteed by the French state. The next slide shows the impact of associated companies in Renault's P&L. We have already published Nissan's contribution for the last calendar quarter in Renault's account. Therefore, Nissan full year contribution came to EUR 380 million compared to almost minus EUR 5 billion posted in 2020. Contribution from other associates turned positive at EUR 135 million compared to minus EUR 175 million a year ago when we had booked negative results from our Chinese JVs. I will turn back to the P&L. The net tax charge for the year came to minus EUR 596 million versus minus EUR 420 million for 2020, in line with the improvement of the results. Bottom line, net profit after tax came in at almost EUR 1 billion compared to minus EUR 8 billion in 2020. Now that the analysis of the P&L is completed, I will turn to Slide 31 on the evolution of net automotive financial position. Cash flow from operation, including AVTOVAZ, but excluding disposal of assets and restructuring expenses amounted to EUR 4.8 billion versus EUR 2 billion a year ago, reflecting the improvement in the operating performance and EUR 1 billion of RCI dividend payment. Net tangible and intangible investments came to EUR 3.2 billion, down EUR 1.9 billion from last year, mainly thanks to our ongoing effort to reduce CapEx and R&D spending. The EUR 3.2 billion investments included EUR 0.2 billion of leased vehicle impact due to higher defleeting of leased vehicles. These investments were largely covered by the automotive free cash -- cash flow, sorry. Excluding the impact of asset disposal, the net CapEx and R&D rate amounted to 8.5% of group revenues. It amounted to 7.3% of revenues, including asset disposal compared to 11.3% in 2020. Disposal of assets contributed EUR 574 million, of which more than half came from the sale of some owned dealer branches in Europe. They roughly covered the EUR 0.6 billion of restructuring expenses. Free cash flow before working capital requirement for which we had given you an outlook and amounted to EUR 1.6 billion. Changes in the working capital requirement had a negative impact of EUR 0.3 billion despite an inventory reduction of close to EUR 1 billion. As a result, the operation of free cash flow was positive EUR 1.3 billion for the year. Net financial investments included EUR 1.1 billion from the sale of the share we hold in Daimler. And finally, ForEx, IFRS and others had a negative impact of EUR 324 million for the year. In total, our net automotive financial position improved by EUR 2 billion compared to the end of last year and stood at minus EUR 1.6 billion. Consequently, the Board of Directors will propose to the AGM not to pay a dividend for 2021 financial year. The liquidity of the Automotive division improved to EUR 17.3 billion at the end of 2021. And in 2022, the group will make an early repayment of EUR 1 billion on the loan from a banking pool guaranteed by the French state as well as a EUR 1 billion related to the mandatory annual reimbursement, i.e., in total, EUR 2 billion. The loan will be fully reimbursed at the latest by the end of 2023. Slide 33 shows the inventory situation in Renault's balance sheet and for the independent dealer network. As you can see, inventories have reached a historically low level, reflecting both stricter inventory management and the chip shortage. In terms of backward coverage, this led to 53 days or 8 days lower than in 2020 and 15 days lower than 2 years ago. It's really low. And now I will turn back to Luca to give you the outlook for 2022.

I also want to take the opportunity to thank Clotilde. I think this company owes her a lot and I also owe you a lot, Clotilde. She has been enduring very, very difficult times at Renault. And I think that the credit of these results also goes to your contribution, your team contribution to Renault. So I also wish you a lot of success with Mobilize. I think that the decision to fully concentrate Clotilde talent and energy on Mobilize shows how ambitious we are with this part of the business. And in a few weeks, I'm sure you'll be pretty surprised by the level of substance that we have beyond this story. But for the time being, let's keep it a secret. Of course, welcome Thierry, we know you very well. So I think we will have a lot of fun. So as Clotilde say, 2022, so we're still facing the component shortage. From our understanding, it should impact particularly H1 2022. And the second big challenge will be inflation. Raw material prices have strongly increased in 2021, and they will continue to strongly wait, I would say, more than twice their 2021 impact. This is our estimation. On the other hand, I can guarantee you that we will continue to activate all operating levers to increase our competitiveness. And of course, we'll continue improving our pricing policy and reducing the cost. So we think we demonstrated that we are able to do it, and we will continue. We expect the market to be growing in Europe and LATAM, where we are relatively strong and present. And in Eurasia, in a non-sanctioned scenario, we forecast a slight decrease. So with the electronic components crisis continuing to impact as we estimate a loss of around 300,000 vehicles for the full year production, which will probably be very concentrated in the H1. And we see it -- the H2 as basically an opportunity, at least this is the way we built the budget. So taking this into account as well as the increase in raw material price, Renault aims at achieving for the full year, a group operating margin equal or superior to 4%. And an automotive operational free cash flow equal or superior to EUR 1 billion. Let me say also that ahead of our Renaulution 2023 outlook, Renault Group will present its strategic and innovative road map at the Capital Market Day in the fall of 2022. I now want to show you how we are managing to turn Renault into a very competitive technology and sustainable company and how we will continue with that strategy in 2022. The group will continue, as I said, to improve its competitiveness. We're getting ready to take full advantage of potential market recovery, probably will be some of the OEM that will more benefit from this return of the demand and of course, of the production when you look at the numbers. And even if we already significantly lowered our cost structure, we are not stopping here. So further cost reduction as planned. We will keep the pace and go above the initial EUR 2.2 billion target. It will all allow us to leverage this sound cost structure when volumes will be back, but also because of the launch of very, very important models. Our real focus is now the competitiveness of our future lineup. I'm very, very confident on the, let's say, on what we're doing together with the engineering and with the design. So all the projects are -- they look very, very good, if I may say like this. In addition to that, we will go on improving our pricing and commercial policy. So we'll not stop here, supported, as I said, by the launches of some cars, we have very, very important launch already in '22. So let me be more specific. So we will launch 7 vehicles in 2022. And this is the kind of a start of our C segment push. First of all, the Mégane E-TECH Electric, potentially a market leader in EV. So then you have the new Jogger, which is roomy and full of family car, praised unanimously by the press. Then we have the Austral. This was for us the missing link because for 1 generation, we didn't have competitive product in probably the most important European segment, if you combine margin and volumes. The Renault Kangoo, which when it's EV version, which will be part of our electric LCV offensive. But also we'll launch the Limo -- this is the solution for caps and ride hailing in the mobile -- under the mobilized brand. And then 2 key project -- products in Russia to complete this pretty, let's say, dense and colorful picture. So if we look at the years ahead, I can confirm you that all the programs are on time. We are building -- I consider being an old car guy and product guy, probably one of the best, if not the best, product lineup that Renault has ever had at least in the last decades. So between 2022 and 2025, we will launch 27 new vehicles. This lineup will embody fully the Renaulution spirit. 50% of the passenger cars will be in the C segment and above. We are also boldly, I would say, taking the shift towards electro mobility. We leverage our range of very competitive platform within the Alliance. First, the CMF EV will carry Mégane E-TECH. Then the future cynic and the new Alpine GT X-Over. The CMF BEV will carry the Renault 5 that you've seen, but also the successor of the Renault 4. And on the CMF A, we will bring -- and this is a decision we made this year, the success of the Dacia Spring. Our LCV lineup will progressively become electric as well. And finally, under the Mobilize brand, will bring purpose-designed vehicles in the market to solve the profitability equation of mobility platform and to reduce the impact of transportation and last-mile delivery in the urban environment. We have started to prepare Renault for the shift to a 100% electric mix by 2030 in Europe. We have all -- it takes to achieve this ambition, 10 years of experience in the EV, a clear battery road map aiming at 65% battery cost reduction by 2028. And also I think with electricity one of the largest and most competitive EV production center in Europe, by 2025, we'll be able to produce up to 400,000 vehicles per year on 2 electric platforms, brand new. In any case, I also want to say that the customer is always right. And so -- and if the market doesn't get so fast into the electrification, at Renault, I think we have also a feasible plan B with all our competence and platform on the hybrid side. So now that we think we put the company on track operationally, we are working on Chapter 2 of the renaulution. Today's changes in the automotive industry requires that we move even further and explore new opportunities. That's why we are considering to the possibility of bringing together the EV specific assets and activity into a specific entity in France with a fully integrated system. This entity would rely on an appropriate business model and state-of-the-art technology that we already have in-house mostly. At the same time, we know that ICE and hybrid engines will remain a significant part of the business with different key success factors, in particular, industrial efficiency and switch to low carbon fuels. To tackle these challenges, we would consider the possibility to create an entity focused on ICE and hybrid powertrain, gathering assets and the activities outside of France. The result of these discussions and the study will be shared regularly with the various bodies of the group and information and consultation procedure will be set up in accordance with the regulation of the various countries. We will present our road map at the Capital Market Day in the fall that we announced previously. So we just have to be patient a few months. On the LCV segment, I don't want to miss the opportunity to talk about hydrogen. We think it's a complementary offer to BV for increased range and quick refueling. This is why we created in 2021, and that was one of the major events of the year, the joint venture with Black Power called Hyvia. The first vehicle will be on the road by mid-2022, and we targeted a 30% market share on the hydrogen LCV market in Europe by 2030. In addition to that, Renault is positioning itself or at least this is our intention as frontrunner in terms of especially connected cars. The Alliance already has more than 3 million vehicles connected every year to this cloud with permanent data exchanges. The next chapter starts with the Mégane E-TECH. For it, we codevelop software platform naming Google Automotive Services. This makes us the global mass market OEM proposing the Google ecosystem in its cars, and partnering up with the best tech players is at the core of our horizontal approach. All this is only the start of a move to extend upgradability to new features. Thus, by 2026, million cars will be connected every year to the Alliance Cloud and 25 million will have been in total. And finally, we have decided that we will launch our first full software-defined vehicle by 2025. This will be a breakthrough. Software-defined vehicles will allow us to propose new services to our customers. We will be able to improve them over the air throughout their life cycle, potentially every day. They will remain linked to our aftersales and service system throughout their life cycle and keep their value most importantly over time because they would be continuously updated. To finish, I am very pleased to announce that we will launch soon a concept car embodying our vision of sustainability. So we wanted to materialize our vision of sustainability based on the 3 pillars: safety; inclusion; and environment on 1 product. This product will announce a future product because when -- at Renault when we do concept, we want to turn that into real cars. It will be presented in a big event in May. And I want to give just the hint that a new car is coming, and you might probably imagine which one, of course, it will be electric maybe hydrogen, maybe other things that we have included in this fantastic car. So what can I say to conclude? Maybe I should say that Renault is back. And for sure, we are all determined as a team not to go backwards to the past. We are approaching the next step, I think, with confidence. Confidence in our ability also to navigate stormy weathers, despite the challenges ahead. I think we've proved it in the last 18 months. We also know where we are going. And as you've just seen, we are already well underway in turning Renault into a competitive technological and sustainable company. I would like to thank you for your patience with us and your attention. And I am now open to catch questions together with Clotilde.

Pierre-Yves Quemener, Stifel. Two questions, if I may. First one on pricing. Price tailwind has been super strong for 6 quarters. You mentioned in Q3 that comps were beginning to be a bit demanding. How should we think about the pricing in 2022 and 2023, especially when volumes recover?

Okay. So maybe I take this one, if I may. So I think if you look at the old story, actually, we have anticipated price increase already in 2020, we continue 2021. So we did before the others, even before inflation kicked in, this is the reality. So we -- yes, I think we're more into kind of into, let's say, challenged position last year. Now we expect everybody to increase pricing. So we are in the condition to actually follow the stream somehow. So we see it less complicated because it will not degradate our competitive position, everybody is going up. And then there is another effect, which is important is that we're getting a lot of new cars kicking in. And normally, you can improve your pricing when range is pretty young, okay? And we have cars that Arkana will have his full year, Jogger will have this full year. Mégane kicks in, Austral kicks in. So I think mechanically, we will have more chances to continue this path. So I don't have big concerns that we will go back even when the volume recover.

And I would add that in view of the inflation that you see everywhere, I strongly believe that our competitors are going to also increase prices. So I think the trend of the market is in an increase in price anyway.

Okay. And obviously, a hot topic today. Russia is your second biggest market. What's at stake here? How you see things going on? If the geopolitics were to toughen a bit, what would be the impact on the operation there?

Look, let's say, of course, we're looking at that carefully because we have a lot of interest in the evolution of the Russian market. I think that the team there did a great job this year. So we can't guess, I think, what will be the future. But you have to remind 2 things. One is that our AVTOVAZ operation actually sales are 90% in the Russian market, only 10% to export and it goes into all the countries around Russia. And they are very highly localized products, okay? So potentially, it could actually be another supply chain, let's say, crisis linked to parts that would have to come from abroad. But as I said, especially LADA cars are very, very localized product in terms of content.

And I would add that the companies we have in Russia, are there -- their debt is local and their financing is local. So -- and with no support of the Renault Group. So they are fully self-sufficient, even though they are indebted, especially AVTOVAZ, obviously, but it's purely local. So also that is, in our view, quite secure.

And of course, we hope that the situation will go in the right direction like all of us, I guess.

I have a few questions as well, please. Firstly, you had a big tailwind this year from used cars and parts even if it's maybe lower than for the German OEMs, of course. Do you expect this tailwind to be still substantial, a few hundred million euros to your adjusted EBIT in '22? Or do you think we've seen the best of that? That's the first question. At the opposite, you had slightly lower raw materials impact than we thought in '21. Should we still assume broadly twice what you had or more for 2022? And do you think that you're going to be able to mitigate that with the everybody raised prices effect that we discussed? And finally, if I can, you usually give us vague indications at least about the profitability by region. Is it possible to have an idea whether you effectively manage to breakeven everywhere in H2 with the 2% of the margin or whether you are still loss-making in some regions?

So on the used car, I think we -- this thing will be a structural trend because of the -- with the switch to hybrid or electric cars that are, by definition, more, let's say, expensive. I think we will see kind of a golden era of used cars for a long time. We're trying to get -- I mean, Renault is a long tradition in terms of -- we invented a lot of things in used car market as OEMs, and we're trying to get organized to really perform and to really interpret this business as one of the core business of things. I'll take the example of our decision, for example, to enter the [ A car ] digital platform, the one that is like was developed by VW and Mercedes. It shows you that we are trying to look at this in a modern progressive way and to make it a very important pillar of our business more than it used to be, let's say, in the past. We are really getting organized also to have a very professional management of residual value. We see the residual volume going up like this. And then used car becomes a good business. So instead of getting used cars out of the system, we are actually thinking about how to reintegrate that kind of financial fluxes and profit within the thing. So I think we will probably -- if the topic is interesting, we'll probably be able to, in some presentation, focus on this topic within this year because we're doing a lot of stuff and we believe in it. On the parts, I think it's the same. And on the parts, we'll probably see announcement of some structural changes in our strategy that will foster increase of business and, of course, margin on the aftersales side.

To add on that point, Thomas, in that box in 2021, we did have a big impact from the sale from the buyback with [indiscernible] because we had lower buyback, which we don't intend to increase, but we won't have the benefit of lowering steel with the sale of some Renault Retail Group dealers that had a positive impact and some one-off, as I said. So for your modeling purposes, it's going to be negative, most probably next year. On the raw material, you're right. I think we've been quite able to retain some of the price increase in raw material in 2021. We were clearly with an average price below the market price. So in our view, it's going to be more than double in next year because we were, I think, a little better than what the market was in 2021. Now as for profitability for region, we don't communicate on that because we don't follow it on that way anymore. But nevertheless, we look at it. I can't tell you between H1 and H2, but I can tell you that all regions have progressed considerably. Most of them are above the group average. The exception is Asia Pacific, where obviously, in China and Korea, with not being full, it's more difficult than in other regions. But all the rest has returned to a good profitability level in average for the group Renault.

Philippe Houchois, Jefferies. I've just got a first the simple one. On the dividend from RCI for next year, you guide for the group to do more than EUR 1 billion on the Auto division. Do you -- your balance sheet RCI is still unlevered and so you could easily pay another EUR 1 billion. Is that or?

No. Yes, it's not the assumption but we indeed have an assumption to continue to pay, as you rightly mentioned, because we have the capacity to do so. Obviously, it's always depending on the approval of the European Central Bank, but we intend to pay something slightly lower, mostly around EUR 700 million to EUR 800 million.

Right. And that's built [indiscernible].

Sure. But we said up or above EUR 1 billion, right.

Exactly. Exactly. All right. I've got another one, a bit more complicated or I struggle with there. It's more about the market. I look at Europe only few other time, 2019 previous peak was below the 2007. So for me, the structural decline in European demand more than we see in other markets possibly. And I'm kind of looking at -- and possibly some segments that we used in Europe the segments are kind of going away. And so that structurally makes it impossible to return to produce levels. And I'm kind of curious about how you see that, if I'm right or wrong, also how you see the fact that I look at your most successful competitor anywhere is Tesla, they go after volume with very few models. Is that the new iPhones are white or black. Is that a trend that you think is something that's part of your thinking? Do you need 20 models in EVs to replace with the 20 models you had in the past? Or can you be much more efficient with fewer models and higher volume? And the last point that kind of goes into that is I fully understand why you're selling your dealers now and nice to offset the restructuring cost. At the same time, though the industry is moving towards direct selling. So I would have thought having your own dealer network might be a niche if you're going to try to sell cars directly. So how do you analyze? And what am I missing in there? It's just a bit of retrenchments first because you need to fund the restructuring or how does it fit into a longer-term strategy for the market?

Okay. So very -- of course, Europe has always been pretty complicated, complex and mature market. It's nothing new. It is true that we don't expect European market to strictly explode like some other emerging markets in the last 20 years. I think we have a solid market share in Europe, and we still have potential with the new products to reconquer some share. But it's going to be complicated. And we also see the -- let's say, we also have to integrate into your equation the switch from ICE to electric, which will make the equation even more complicated. But I think we know the market, we know better than many others because that's our own turf. And exactly, we are preparing to that. We believe that there will be a strong switch to electrification because of the regulation. Europe will probably be one of the places where -- because the rules of the game, electro will go, we know that hybrids will play a role, but we're prepared to that. And that's life of an OEM. On the second one, it's clear that last year when we presented renaulution, let's say, strategy also on the product planning. We are taking the opportunity or we took the opportunity to -- yes, to make our range more efficient, okay? So not only technically and you've seen the results, so it will take 40% less to produce the same car. It means that you made a lot of work on cost reduction, but also some decision fuel that kind of result because we've been very, very efficient, some programs we do 5, 6 cars with more than 80% carryover, which we didn't do in the past. But in general, the range will be much more focused and we'll try to go into segments where there is volume and margin, okay? So that's the thing. So if you look at what was the plan before and what is today, I think we will have one of the most, let's say, efficient ranges in Europe. And coming with the electric wave, it would probably be even better, okay? So we kind of somehow following the example of the brands you mentioned before. No, I have one on the distribution. Look, we had -- we actually had 200 own dealers. The old system was loss making. So we decided to -- we actually sold 25% of them this year, and we'll continue to do that, but not completely. The one that will remain will represent the best of the best at what we can do in retail where this will be -- these will be the places where we will show to the rest of the dealer body, what are the processes, the technology, the experience that we want and to set the standards. The other big discussion is on the distribution. It's not only to own and to control the thing, but who owns the stock and different models. We are not going into this direction, at least for the main brands because we believe that we are not in a condition to bear the weight of owning the stock in billions, okay, which the agency model somehow forces you to do, okay? But we believe that we have a potential to reduce the cost in distribution. We're doing actually that even for the dealers. And we are building a business model that is one of the most attractive amongst the volume OEM by allowing the dealers to concentrate on the things that really matters and get rid of the costs that are absolutely useless. I consider the dealer body as a key partner of my activity. And I will continue to think that our job is to give them the tools and the ability to do a good business. And I think it's better.

We will now take some online questions, and we'll start with Dorothee Cresswell from Exane.

So I have two questions. One is around investment and depreciation and amortization. So it seems that you've become much more efficient when it comes to investment spending. Could you give us some feel that the absolute level of CapEx you're planning to spend on PPE and R&D in 2022 and 2023? And then just as a reminder, can you tell us why was there the sharp decline in D&A this year, particularly in the second half? Because I think initially, we went into the year thinking that would be a headwind. My second question is a longer-term one. Could you just outline what plans for China a bit? We've seen you scale back your activities in the region but you've also said in the past that it remains important for you to have a foothold there. So what's your latest thinking around that? Perhaps you could also tell us whether the budding relationship with EV in South Korea could be useful in that context? And Clotilde, all the best for the next role.

So on the investment, I think for now, I think you should take it as assumption that we would be rather flat in this year versus last year. So we were at 3.8%, 3.9% basically. We are where we want it to be faster, but we don't intend to continue to drastically reduce the R&D and CapEx because we need to fuel the midterm plan and all the nice cars that we have in the pipe. On the depreciation and capitalization, as I mentioned, there are -- I mean, diverse forces, if I may say, because you have a negative clearly of more than EUR 100 million based to the reduction in capitalization rates. That's the negative part, which we did not anticipate so sharp by the way. And it's true we guided for a negative impact still for this year. That is fully true. Now what we probably have done really correctly assessed was the impact of the impairment that we've done last year, and also some allocation of the duration of some cars in view of the current context. So all in all, I guess you have a positive impact of, let's say, EUR 150 million this year on the amortization net-net of the pluses and minuses but it should turn back negative next year, obviously, because as we continue to invest, it's going to be negative next year. And probably around 0.2 points next year on the operating margin.

So 2 questions on China and Korea, I'll start with China. I said last year, 2 things. One is that a brand that sees itself as a global brand can't avoid being somehow up in China. And the second that we say -- things I said is that it would probably take us a few years before fixing the issues and the problems we have there based on the previous [indiscernible] that didn't work and to reenter with a new approach. A few interesting things happened in the meantime. We have -- we are kind of recharging of, let's say, the cooperation with Dongfeng for -- that produces the Dacia Spring. So the success of the product is obviously creating a better, let's say, relationship and mood between the partners. It's a company called EGT. We are -- we have also just launching the limo for Mobilize in our GM EV operation. We'll see if the project works. I think there is a potential for that. And third, we are in a restructuring process of our LCV unit called RBJAC, which is running for what a restructuring process can run, let's say, I would say, pretty smoothly. But we still working on the cover with the idea that if we got a go back to China, and one day, I hope it will happen. We'll have to bring something that doesn't exist there. We will have to go directly, not even to the 5G, probably to the 6G that's what we have to do. If we want to have a chance to succeed in a market that is becoming one of the front runners on many of the technology or customer demands, and where sometimes you feel whether it's a more comfortable position not to be there and have the chance to start from catch of being an incumbent in China with all the assets. So I feel that we have an opportunity if we do it right, to bring something additional to the equation, something new to the Chinese consumer. And we will work for it and we will probably come with some news in the next months. The cooperation in Geely is also part of reestablishing a certain presence and reputation within the Chinese ecosystem. We are very proud of being able to work with July because it's one of the best OEM on the planet right now with a lot of technology and a very ambitious strategy. The deal with Geely is very much focused for the time being on Korea. I'm sure you've discussed in many of these similar events during the years, the issue of Korea. We actually had no possibility considering the product plan that we have imagined to really bring something to Busan, okay? Also because the Korean market is very focused on DE segment cars, which are not especially of this house, okay? So I think that the deal with Geely is a fantastic opportunity to take advent and leverage this asset and to secure the perennity of this plant. So I think you have to look at that as pragmatic way of making sure that those few thousands of colleagues and employees and engineers and works in the plant can look at the future with optimism. So I thank Geely for this generosity in this respect. And I keep motivating the people there because I think we have obviously a challenge, but we have also now a clear way, a road map ahead of us. So that was a major thing, maybe you know that closing a plant like this or not buying a solution for that would have been a huge impact for Renault. And so this risk for the, let's say, this moment is out of the table. And it's off the table, and this is good news for Renault.

And there is an online question from Goldman Sachs.

The first question, I just wanted to follow up just on Dorothee's question, if that's okay. Just setting aside the R&D capitalization and amortization and focusing on the depreciation, if I look at the depreciation specifically, it looks like the second half was about EUR 250 million lower than the first half and roughly EUR 375 million lower than the second half of last year. Am I correct to understand that you do expect the depreciation to step back up in 2022? And then the second question I had was just on the purchasing savings. Obviously, you're seeing very good progress here. And also it looks like a very strong sequential progress. If I look at the purchasing savings as a number per unit sold, it looks like it was around EUR 123 per unit in the first half, but as high as EUR 370 per unit in the second half. Is that second half level sustainable as we look forward? Or do you think you can actually achieve more on the purchasing?

Thank you, George. On the depreciation, I'm not sure I get to the same numbers. So I would propose to take offline this explanation with the team on the numbers for H2. It doesn't ring a bell to me. But on the trend for next year, yes, you're right. That's what I said before. We -- you should forecast globally for R&D depreciation and amortization globally, something which is increasing with an impact of around, I guess, 0.2 points. On the purchasing saving, it's true, we had a good performance in the second half, but you have some very good job from the team there, which is linked to all the work which has been done in order to rethink and reengineer the [Foreign Language] the capitalization.

The exhaust system.

Thank you, the exhaust system, where -- which has been done a few years ago in a hurry, I would tend to say in order to meet the regulation, which was coming and strong. And by looking more in detail, the team realized that it could be improved drastically in order to reduce the consumption notably of precious material. The work has been done late last year, beginning of this year, but the impact on the P&L is mostly in the second half, and that's a big impact, which is a process that we do usually to review constantly how we could improve the parts in the cars, which are already in the streets, the cars which are already produced. But here, there was a big bucket that came into benefit, I would say, in H2.

And that will continue obviously.

They will obviously continue that type of exercise, and they are trying to look for good big buckets like this one. But on the purchasing side, I would say, yes, we do believe that we're able to continue to have a good performance, but the input cost because we talked a lot about raw material. But if you look at energy and freight, which goes directly also in what we buy, it's going to be quite a big number next year. And I'm afraid some of the productivity effort that we're going to be doing both on purchasing and manufacturing might be eaten in some parts by this input-cost increase. So good performance per se, but headwinds on other elements that goes in the same buckets, if I may say.

We have another question from HSBC.

I just wanted to clarify, please, what you said around the volume. And if you could maybe quantify the volume that's attributable to the deliberate market share declines as opposed to the 500,000 units attributable to the semiconductor shortage. And also with reference to the 300,000 units that you mentioned in your guidance for next year, is that basically true? Can we sort of see the 200,000 unit delta as a change year-over-year? Or are you intending further deliberate, I think you call them poor pockets of market share to give up. That's my first question, please. And then secondly, just on the profitability of the hybrid. I think a few quarters ago, you showed us a chart where the hybrid's profitability in terms of contribution margin, even though I believe it was for the B segment specifically, it was only going to breakeven profitability of ICE's between 2022 and '23. So considering the higher share of hybrids now, I wanted to see if that was still the case or if you have become more constructive on the profitability of hybrids?

So you want me to...

You can start, I can catch up later.

So I think that it's very difficult to make the part between -- within the fiber and what is the path that we lost based on kind of renouncing to some of the channels and the one we lost for components. We've made some estimation, but actually, I don't think they're completely accurate, right, on this one. On the 300,000 yes, that's our estimation visibility. It's true that this -- all semiconductor supply chain issue is not very transparent still, okay? So we have learned to be a little bit skeptical about promises that are made, et cetera, but we're getting more and more organized to keep the machine under control. Everybody, let's actually let's say, stating that we are almost at the end of this that maybe, let's say, in the H2 of 2022 we get to normal. But looking at the speed of this, we believe that 300,000 losses is potentially kind of centered value. On the hybrid, yes, we keep working. I think that -- I mean, the result is the profitability that we're showing. So if we are able to do that profitability with a very high mix of hybrids, taking the Arkana, for example, it's 60%, let's say, hybrid mix and more. And this is a very, very profitable car, probably the most profitable we have in the passenger car range right now. So it shows that the technology is competitive. Don't forget that E-TECH is a very unique technology that also has a potential to be one of the most competitive in terms of cost because we actually don't have a gearbox inside, normally are very expensive. So the whole thing is done with 2 electric engines, not to kind of combine the electric part with the combustion. So this is structurally something that will allow us to have E-TECH being a very, very competitive technology in terms of cost. So yes, we feel that -- I mean, when I came here to Renault, one of the things that was like kind of very positive surprising to me, I didn't have a lot, I have to say, but a few because of the situation we believe 18 months ago. But the all-electric story and the hybrid was like I was very, very surprised by the quality of the work that had been done before.

Sorry, Luca, thank you. But just to clarify, so in terms of the deliberate market share reductions, you are done with that? Or are you going above the 300 for next year?

No, I think that we have cleaned up the channels, if I may say like this. And in fact, what's happening is that when you push, push, push and then you start to get, I don't know, for example, self-registration out, short-term rental out, then you go into big accounts, which are the most costly channels for us, then what happens is that they come back because they need cars. But then you have some arguments to rediscuss the pricing of the thing. So what we're going to do is probably look at opportunities, but there is one thing we're not going to compromise with is we want to increase the profitability of this house. So we're not going to do whatever, just for the sake of pushing metal into the market. We have reduced rightsize production capacity. We are organized for that. And so we're going to try to go back also in some channels because it's a good thing to sell cars to big companies, et cetera, but we want to do it in a condition that will allow us to get -- give them competitive products at a competitive price, but also we need to make money. It's very clear, it's very simple. So it's rather we come back rather than we step back.

We have another question from Bank of America.

You see I'm dedicated to Renault. On the questions, I have got two, please. The first one is more about cost cutting since you achieved now your targets early I want to understand what potential is still left basically from here on? Or is there the need also to fine-tune the targets just because the volumes are now lower and that what you saw when you presented the plan initially? And in that context as well on raw materials again, so you say that it's going to more than double in '22. I just want to be clear, we should not expect that these costs could maybe even triple because the base is no lower than you presented for '21. And am I right in assuming that raw mat target, I mean that does not include energy and freight? And Clotilde, you said that could increase significantly. Could you specify that a little bit? And then also lastly, on the supplier cost because all suppliers tell us basically they pass on cost to the OEM since they guide for something like 5% pass on. Is that also included in your raw head cost guidance? What should we expect here?

You want to take it?

Yes, I can. Yes, on the cost cutting, obviously, as we said, we don't want to stop here. We've done a big achievement in 2 years, so don't expect the speed to be the same. But I believe that we start to reduce our cost base. There is still opportunity to do so. The low-hanging fruit, obviously, have been done, but we still need to continue. And remember, what we said during Renaulution is that we're targeting for 2023 EUR 2.5 billion, including EUR 300 million of variabilization and EUR 3 billion for 2025. So we're working on that, including on the variabilization, you saw that we started with the sale of the -- of some branches of our dealers. We have some other ideas but we're working on that. So you can say -- we can think that it's going to be the road again, confirmed from what we said in Renaulution. On the raw material, well, more than 2. It's difficult to know because it's true that we have booked already a big portion of our steel purchases, but it's not the case for other material, especially the indexed raw material. So from what we say today, it's a good comfortable more than 2. I don't know if we could go up to 3 for the moment. Energy & Freight, you're right. It's not in that box. In our current, maybe we will portray differently if the increase is big in 2022, but it goes in the productivity box, and it's a few hundred millions also. And on the supplier, maybe then I turn back to you, Luca.

Supplier, I mean if these are so, let's say, kind of bullish about they're passing all the costs us. I mean, that's not what they tell us, but -- so because we are -- that is obviously a kind of a battle to share the pain into the thing. I have -- obviously, we have -- with the relation that we have with some of them, structural relation, we're trying to negotiate that. But we have to take care that suppliers also make their margins. But on the other hand, we cannot screw up all our competitiveness. So this is the typical fight between the purchasing and the supplier since ever, okay? And it's -- the discussion is very hot these days because sometimes we're seeing materials going up very, very quick. But it's not for them as easy as they described it because obviously, we don't want to take the whole burden of that. That's a reality.

But it's included in the guidance, Luca, right?

Yes.

Our assumption -- all what we discussed before, raw material, energy, freight, market share, EC crisis, everything is included in the guidance, obviously.

We now have a question from JPMorgan.

Just a couple of questions, please. On cash, can you talk a bit about the restructuring cash outflows, '21 and '22, what did you see in the second half of '21 or just '21 full year? And then what are you expecting in terms of restructuring cash outflows for 2022? On cash as well, please. Do you still see -- or do you see a working capital opportunity? I know production has to come back, but it looks like we have still more than EUR 1 billion of opportunity on working capital, particularly in payables. And Luca, please, when we think about CMA and Dacia, what kind of opportunity is this for you? I think this can drive incremental cost savings as you put on this architecture, if you could speak about that. And also, I know the Austral still needs to be launched, but some of the initial details that come out. This is a game changer, the car vehicle will be larger. So can you talk a little bit maybe -- maybe not so much about the car that's coming now. Obviously, you have to keep the details for yourself. But a little bit, what is the opportunity in this segment? You mentioned before that you were not -- you didn't have a competitive product in this segment. But obviously, some of the details are coming out clearly point in the direction of being a large game changer.

So on the cash per se, it is relatively level between H1 and H2 with a different distribution, if I may say. In H1, it was mostly France with the voluntary departure plan and the early retirement plan, but also Korea, where we had to adapt the structure in view of the lower volume following the ROG finish production stop. In second half, it was almost completely France because we launched a second voluntary departure plan. We announced a second departure -- voluntary departure plan and an additional early retirement plan. So it's more France, which is at stake. In terms of 2022, we're going to -- I'll continue to pay for the plans which have been announced, especially the early retirement because as you know, it's over -- we may know it's over 3 years. So you could take as an assumption that it's going to be slightly above, like EUR 100 million above next year in terms of cash out. In terms of the working capital, you're fully right, Jose you very well know working capital is negative. So when the volume is going to come back, which was not the case in Q4 because it was a big hit from the EC crisis going to have a reverse on the working capital, especially as you mentioned, on the payables. Also to be mentioned, we have not finished with the inventory. They were very low this year, but we're still working on the -- how can I say, structural reduction of the inventory, thanks to lower diversity, trying to better supply chain, et cetera, et cetera. So all in all, we do expect next year to have a positive working capital provided the market is where we think it's going to be in Q4, which is early to say, but it should be positive.

We've done a lot of work, Jose, on the stock. We came out with -- but not only because of the, let's say, lack of components. And so we did a lot of work to clean up the whole supply chain to connect all the -- have kind of a 300 holistic approach to the end-to-end supply chain. And one of the things that I'm more happy about is that, for example, we lowered down all the stock in the day. So the quality of the stock is actually very good, and we will continue to do that. So we're investing in tools and IT and organization to really make sure that this house works with a very, very low level of stock avoiding peaks and downs and lendings and stuff like this. So that will be 1 of the 1 of the, let's say, project of the year that we want to really execute. So you asked me a couple of questions on the product. I think with the CMF AEV, we probably have the most cost-effective and competitive small car platform on the planet, basically. It comes from the work that was done a few years ago for India and other countries and the adaptation that was made of this platform to EV, it's actually pretty spectacular. I mean, I don't know if I'm correct, but I think that the Spring -- last month was the number 1 electric cars sold in France. So this is kind of -- you want to have buy one -- for the EV, you buy that and it's a way for a lot of people to access to EV, so it's a very sharp, clear positioning of the thing. And actually, with that at less than EUR 16,000, we are making money because otherwise, Dacia will not be so profitable, with the car that's coming from China with all the logistic things. So imagine the advantage that we have in terms of cost. And we will have to evolve this platform because you have new regulation coming in, GSR2, the demand for connectivity, for man-machine interface. So we are -- we have in the home, we have a very, very nice success for this product. And we believe that maybe a segment combustion engine cars will disappear from the market because regulation are very penalizing for them. But maybe the only way for the A segment, urban cars, a second or third car in household to move around and to bring the kids at school electric is a good concept. So I think the market will survive as an electric market. On the Austral, I also think that for us, I don't know if it's a game changer in general, but for sure, it's a game changer for us because C segment SUV was the big hole into our range and our offer. We are using one of the most, let's say, the biggest platform in the industry, this is the platform of the CMF CD of the Alliance. I don't know how many million car on that. This is the brother of Qashqais, X-Trail, ROG that are sold around the world, also from Nissan. So we think we have a very, very competitive base. I'm not sure I can't say everything, but we will actually present the design of the calendar 8th of March. You will see this very, very nice product interior and exterior. We will obviously bring the new infotainment system that you've seen on the Mégane. A lot of ADAS will be introduced in the car. I'm just going to give you some news, but I'm sure the guys from communication will kill me. But we do 105 grams with 200-horsepower E-TECH engine on a C SUV with that car. It tells you the quality of the concept. So we are confident, and we think we can fill a hole in our thing, and it will bring additional volume and margin, but let's see, this is also very competitive let's say, segment. I also have to say that there will be not 1 but 3 cars on the same platform.

Now we have a question from Gabriel Adler, Citi.

My first is on the free cash flow guidance. I just wanted to come back to the guidance here because if we put everything together that we've spoken about already on accrual, higher earnings this year, investment flattish, the strong working capital inflow given the negative working capital, offset maybe by lower RCI dividend and slightly higher restructuring. But the guidance for greater than EUR 1 billion seems very cautious to me. Is there anything I'm missing here? Or would you agree that the EUR 1 billion free cash flow guidance should really be considered as an absolute floor here for 2022? And then my second question is on a comment that was made around the order book during the presentation. And you mentioned that the order book is now at a new high of over 3 months of sales. Obviously, this is partly reflective of the supply environment. So how do you think this order book level could trend as supply normalizes? And what steps are you taking to operate with a higher order book more structurally in order to support pricing within the business?

So on the cash flow, the negatives versus this year are RCI dividend, as you mentioned, but also the asset sales. We have a plan to have a good number of asset sales, but with asset sales you never know. So we prefer -- and especially some are scheduled for Q4. So with SSL, you never know if it's going to be Q4 or Q1 of the next year. All the rest, you're right, should be at a flat or positive. But you know me, when I announced the number, I want to be sure that we reach it. So it's a floor. It's definitely a floor. And if we have what we think in terms of EC crisis, what we think in terms of raw material spike that we will definitely will -- be comfortable with this guidance clearly. That's all I can say.

On the order bank, yes, we are much -- let's say, much higher than 3 months, in fact. And it's good on one side. It's not good on the other because customers have to wait a lot. We're trying to position the product in the right market in the right segments with the right version to obviously maximize the profitability for us that we've done, and you've seen the results. A normal situation would be that you have a order bank slightly higher than 2 and stock, which is slightly lower than 2. That's what we -- and I remember when I came here, we were in a completely different situation, and we work hard and very quickly. We get to that balance and then you have easy crisis coming in and also the demand is picking up. So yes, so the good thing is that demand is there. We don't have an issue of demand. I don't know what the other competitors are doing, but we don't see problems in the order income. Of course, when you have to wait maybe months and months for Renault and Dutch that people are probably going somewhere else, but I'm not sure that they also fund the cars. Maybe they buy used cars or they keep their car for a longer time. But we don't see a problem in demand. And we have to rebalance that. We have to rebalance in that dimension, 2 plus, 2 minus, okay, that's a good number.

And we have a question from Stephen Reitman, Societe Generale. Do you want to take the next one?

Two quick questions. Just Luca, can you just sort of maybe -- what's the dream at Renault in terms of size where you want to be, right? This was a 3.94 million company. One of the big mistakes was to think that we could go to 5, right? So now we're a 2.7 million. What is the right size for this company? And where can you be most profitable, right? We're not going back to 3.9 million in the short term. Europe is not going back to where we were. So can you talk about that a little bit? And then the flip side of the question is, I think if I was an investor right now, the industry globally is more profitable today than it's ever been before, right? These conditions are crazy, right? So you're now at cash flow positive, which is wonderful, but you're not as profitable as a lot of your peer group. Where is Renault going to be if this industry isn't as helpful as it is at the moment, right? What happens at that stage, right? That's what a lot of investors are going to be asking. This is a great performance by Renault considering where you've come from but maybe things aren't going to be quite as easy at some stage going forward. And easy, sorry, that it's a really terrible word for me to use. But the market environment has been friendly. The pricing environment has been very helpful, right? That's not always going to be the case. So those are the 2 kind of questions.

I don't say that it's been easy. I think we have -- I mean, I'm 30 years in the industry. I think I have never, never seen a combination of so many challenges altogether. So we can say, well, at the end of the day, as the automotive industry stays, the volume industry. So when you lose like 25%, 30% of your volume or you go to 0 production in a semester like because you have lockdown, you can't say that this is easy. Yes, we're trying to as all me and the teams and all my colleagues and other try to take advantage of the opportunity that we have scarcity on the production to actually clean up a little bit the thing. But this is also proof when I -- when I remember 1 year ago, was saying, yes, we have to go from volume to value, okay? And people say, yes, yes, volume to value, but you got to do volume. We prove that we can do a little bit less volume, but create much more value, okay? And now for us, the next step is to do value and then a little bit more volume because -- but in a healthy way because, for example, the new products are coming. So you have to understand like we could like -- we got like hit by the -- all the situation, 2020, 2021, in a moment where the lineup of Renault was not particularly strong. And Dacia was pretty strong, but Renault at only a couple of competitive products in the B segment, et cetera, et cetera. And now we are taking advantage -- I think it's between 23 and 25 were probably the best range of cars. So is Renault going to be 3.5, 3.3, 3.25, right? It will be better than today, okay? It will be better than today. That's my feeling. And what we want to do, the dream is not about -- of course, we want to grow, and I think that we need to be in the markets where we are present. We cannot be a second-level player, okay? But it's never going to be an obsession for the volume but the volume should be, let's say, the consequence of the good work that we do. So we will focus on profitability on better segment, on better markets, on better products. And the other thing that I have to bring back together with my friends on the technical side, et cetera, is that we have to bring back techno innovation in Renault, yes, because that's what counts, okay? And I think we have the competence, we have the means and the resources to do it. So you will see Renault much more front run on a few things. We can't do everything. But on some of the things, we will be, I believe, pretty well positioned.

If I may add versus others where we still have to work is the cost side, both the fixed cost and the content of the car, if I may say. But the big, big difference, in my view, is the lineup. Today, all the big lineup offensive is coming. So I think we can be very proud of what we do without that lineup. And when you look at others, the lineup is different without naming anybody, but you see what I mean. So again, the arrival of Mégane, E-TECH, Austral and everything which is in the pipe is what is going to make the difference in the future versus others.

Just to give you -- to make it simple, we do 25% of C segment cars, okay compared to 50%.

That's it, yes.

Yes, 50%. In the C-segment car, more or less, you earn twice between 2x and 3x what you own -- what do you earn in a small car. Make the math, you will see what will be the effect of that.

So my takeaway is that we're going to add potentially 500,000, 600,000 units of volume at 2 to 3x the average profit. Is that correct?

That's a very, very basic calculation.

I'm really sorry, guys, but this is now at the end of this session. Luca, the floor is yours for the conclusion.

I just want to thank you all here and the ones connected for taking the time. It was a pretty long session, but I hope it was interesting for you. I hope that we were able a little bit to explain in depth what's going on in this house. It's a bit magic. And we're very -- let's say, I'm personally very proud of being having the chance to participate to this challenge of bringing back a historical OEM back on track, and it will continue. So we are prudent. We don't want to overpromise things. We know that it's a very uncertain environment. We're getting more and more confident that everybody knows the benefit of elution that in this house, everybody knows what we have to do and that's already a good starting point. Thank you very much.

Thank you.