Renault SA (RNO) Earnings Call Transcript & Summary

Good morning, everyone. We are happy to start this 2023 Q1 revenue conference call. With the new Renault Espace just revealed 3 weeks ago. But now let's talk about Q1 revenue with our group CFO, Thierry Pieton

Thank you, Philippine. Good morning to everyone. Thank you for joining us this morning. I'm very pleased to be with you this morning to present our revenue figures for the first quarter, during which Renault Group delivered another solid performance. The group registered 535,000 units in the quarter, a 14.1% increase over the first quarter of '22 on a pro forma basis, which means excluding Renault Russia and AVTOVAZ volume, from 2022. Looking at Europe specifically, were up 27.3% at a market up 16.2%. The Renault brand sold 355,000 vehicles up 8.6%, while Dacia posted another outstanding performance with a 34.3% growth, delivering 172,000 units. As you are about to see, our Q1 figures continue to illustrate our relentless focus on value, pricing and distribution channel discipline -- approach that's increasingly supported by the success of our new models. Here are some key data points to showcase our volume-to-value go-to-market approach, starting with our product mix. Firstly, C segment and above represented 42% of our Renault passenger car sales in Europe, up 9 points year-over-year. In Europe, Renault brands grew more than 51% on the C segment. In Q1, thanks to Megane E-TECH, Arkana and Rusthall.. Renault brand was ranked #1 in France on the C segment in the first quarter. This is symbolic, but it demonstrates that Renault is back in town. Secondly, the high-end versions of our new products continue to make up over 60% of our mix. This highlights the attractiveness of our vehicles. Thirdly, we keep on optimizing our channel mix in Q1. The most profitable channel accounted for 68% of Renault Group passenger car sales in the 5 main European countries, broadly stable year-over-year and up 15 points since the first quarter of 2020. For the Renault brands, retail stood at 54%, which is up 10 points versus the market average. Together with our continued efforts to optimize pricing and discounts, these actions drove a 14.6 points positive combined pricing and product mix effect. We expect these effects to ease slightly as we move forward into 2023, mostly due to tougher comps, but they will continue to be strong revenue growth drivers throughout the rest of the year. As you know, Renault Brand's ambition is to be 100% EV in 2030 in Europe for passenger cars with an intermediate milestone at 65% of electrified sales by 2025. We're on track to reach this objective, thanks to the commercial success of our EV and hybrid lineup. The Q1 trends confirms the acceleration observed in 2022 and 38% of our clients went through an electrified vehicle, hybrid or BEV, against 35% in the first quarter of 2022. Renault brand sales of electrified vehicles increased by 24% in the first quarter versus last year. There's more to come with 2023 launches, among which Renault Espace E-tech for hybrid and the Kangoo EV passenger car. 2024, we'll take this to the next level with Scenic and [indiscernible] to name just 2 of the key launches we're looking forward to. We're back to growth but in a more profitable way, how? by playing offense on the C segment and on electrification. This is illustrated by our most recent launches in 2022, Megane E-TECH and [indiscernible]. Let's start with Megane E-TECH, the first revolution car. It was the #1 EV of its segment in France in Q1. We sold more than 11,000 units in the first quarter of which over 70% of high trim versions and over 80% for the most powerful motor. We've now recorded more than 54,000 orders since its launch in June 2022. Megane E-TECH orders are improving in March after a start of the year that was affected by subsidy cuts in numerous EU countries. Focused on customer satisfaction and residual value, we favored price stability in a very challenging environment. As a result of our actions, customer satisfaction and quality are at the highest level compared to our last launches and residual values keep pricing supporting the cars competitiveness. This is our approach. Austral is a very important launch for Renault brand as it represents Renault's return on the C-SUV segment. Launched last November, the beginning is clearly a success. Registrations amounted to 15,500 units in the first quarter, 67% were E-TECH hybrid and more than 60% of our clients went for the highest trim versions. We've already taken over 40,000 orders since launch in November, and the vehicle is performing even better than we expected. Austral will pursue its launch process with the upcoming start of sales in the U.K. and the high trim versions becoming progressively available in all countries. In the meanwhile, Arkana continued to perform very well with 18,500 units sold in the first quarter of 23 in Europe with 60% E-TECH hybrid mix. As you can see, Renault brand C segment offensive is underway. Let's take a look at the Dacia brand. The new brand's identity has been a true booster in 2022, and Dacia pursued it's strong momentum in their first quarter of '23. Sandero and Duster remained top sellers in their respective segments. Jogger, the roomy and affordable family Dacia continues to perform very well and keeps receiving excellent press and customer feedba. Launched in January 2023, the hybrid version, which is the first hybrid in the Dacia range, represents already around 1/4 of the order mix. Jogger is a key product to attract new customer profiles from the competition and its hybrid version supports Dacia's smooth electrification strategy. Dacia Spring is among the most affordable European EVs for only EUR 21,000 before bonus and continues its momentum with close to 110,000 orders booked since it was unveiled in the spring of 2021. It was again on the podium of retail electric vehicles in Europe during the quarter. We launched Spring's brand-new electric 65 version with 65-horsepower available in the new top of the range extreme version, this engine provides more acceleration and fun to drive. The new extreme TRIM levels offers exclusive features to data customers on all models in the range. This is an additional asset for Dacia to attract new customers. In a nutshell, Dacia continues to grow while remaining simply Dacia, the best value for money proposition on the market and you know the attractiveness of this franchise for us financially. Let's now see the contribution of our different segments to the first quarter revenues on Slide 11. As a reminder, the revenue of continuing operations presented on this slide no longer includes the Russian automotive activities in 2022 and has been restated accordingly. The impact of this restatement on automotive revenues was EUR 0.4 billion for Q1 of '22. As you can see, Group revenues were up 29.9% in the first quarter at EUR 11.5 billion. At constant exchange rates, they were up 32.5%. Automotive revenue stood at EUR 10.5 billion, up 29.7%. The mobility services contribution amounted to EUR 9 million, up EUR 1 million compared to last year. Mobilized financial services revenue increased 32%, driven by the increase in interest rates and the higher average performing assets. I'll now continue the analysis with a review of the automotive revenue for the first quarter on Slide 12. Reading from the left-hand side of the slide, the ForEx impact was negative 2.6 points, mainly driven by the Argentinian peso and to some extent, the Turkish lira devaluation against the euro as already seen in the last quarter of 2022. Then volume was up 18.6 points. This is essentially driven by the increase in production compared to Q1 2022. Thanks to the commercial success of our new vehicles, coupled with improved availability of electronic components. This volume effect is higher than the growth in registrations due to the lower destocking of the independent dealer network in the first quarter of '23 compared to Q1 '22 when the electronic components shortage was at its peak. Geographic mix was up 2.7 points benefiting from the strong progress in Europe, as I commented earlier. Product mix contributed 5.2 points, mainly fueled by the success of Megane E-TECH and the launch of Austral for which the average revenue per unit is significantly higher than Renault Group's average. The price effect was again a strong positive for the quarter with plus 9.4 points. Part of this effect was embedded in the order book built in 2022. It reflected our continued commercial focus on value, price increases to offset inflation in ForEx, coupled with optimized commercial discounts. The impact of sales to partners was positive by 0.9 points. We no longer have the negative effect from the end of production of Movano for Opel and Talento for Fiat. We're now benefiting from a dynamic LCV market, driving our sales to Nissan, Volta Trucks and Mercedes-Benz. We also started benefiting from the start of production of ASX for Mitsubishi Motors. The last item, others, showed a negative impact of 4.5 points, mostly related to a decrease in the contribution of sales from the Renault Retail Group network following the disposals of branches as well as a higher accounting elimination of intercompany sales to RRG. These effects were partially offset by the increase in the aftersales activity. If you turn to Slide 13, Global inventory stood at 580,000 units versus 336,000 units a year ago when the EC crisis was at its peak. And inventories were at the lowest point in absolute value since 2020. Group inventories are up 133,000 units compared to the end of '22, reaching 275,000 vehicles. Deliveries were impacted by continued downstream logistics capacity shortages, even if we saw some progressive improvements with more truck drivers available, the increase in production still resulted in tensions in the deliveries. In addition, we chose to manufacture some incomplete vehicles to manage short-term volatility in electronic components deliveries like we did in previous quarters. This will be resolved in the second quarter. The dealer inventories totaled 307,000 units, down 33,000 units compared to the end of 2022. The level of these inventories is fully supported by the order book, which remains at record levels in absolute value and has even grown since the end of 2022. It stands at 3.3 months of sales at the end of March, still significantly above our normal level of 2 months. I will now comment briefly on Mobilize Financial Services commercial performance. New contracts increased by 7.2%, reflecting a higher level of registrations on the scope of operations of MFS, thanks to the group's net pricing policy, the average finance amount significantly increased and total new financing rose consequently by 17.4%. The average performing assets follow this trend with an increase of 13% at EUR 49.4 billion. Mobilized Financial Services revenues were up 32% to EUR 0.97 billion mainly driven by increased interest rates and higher average performing assets. Let's talk about the rest of the year from a product angle. 2023 will see key launches that will complement the successful ones from 2022 and which will preempt the larger wave of launches we will enjoy next year. We launched early January, the hybrid version of Jogger aside from the already compelling success of this model, the most affordable family car in the market, offering a hybrid version with a price starting below EUR 25,000 is an important milestone for Dacia's smooth electrification strategy. Secondly, new Espace, which was revealed 3 weeks ago, will be available from midyear with an entry price below EUR 45,000. In simple terms, Espace has more space, more modernity with less environmental impact. Espace is based on the CMF CD platform shared with other alliance models, the Nissan Qashqai X-trail, Outlander for Mitsubishi and Renault Austral. It offers a value proposition that's unmatched by the competition in terms of fuel consumption and CO2 emissions per kilometer at 4.6 liters per 100 kilometers and 104 grams emissions, respectively. It also offers the OpenR and Google automotive services that our customers have come to love on Megane and Austral already. The new Espace [indiscernible] return on the D segment with an SUV that has around 80% commonality with Austral another model from the same family. Clio will benefit from a deep facelift moving to the new brand identity for which our external customer testing is very promising. Clio, as you know, is the best seller for Renault brand and will support our performance moving forward. Starting from the third quarter of 2023, it will be proposed with an E-TECH 4 hybrid version as a core engine. Lastly, we will also launch the Kangoo EV passenger car with the start of sales in May. Produced at electricity in our [indiscernible] plant, it joins the van version launched in 2022 in our lineup. Moving to Slide 19. Let's look at our guidance for the full year. During the full year results, we shared with you our views regarding the 2023 challenges and opportunities for Renault Group. These have not changed, and our assumptions are still valid. We kept a low single-digit assumption for the European market and a flat assumptions for our markets outside of Europe. We confirm our 2023 financial guidance with a group operating margin superior or equal to 6%, and automotive operational free cash flow, superior or equal to EUR 2 billion. The first quarter reinforces our confidence and the achievement of these goals. This concludes my presentation. I'm now ready to take -- to answer your questions with our Fabrice Cambolive, Denis Le Vot and Xavier Martinet. Thanks for your attention.

Thank you, Thierry. Now let's start the Q&A session. We have a first question coming from Jose Asumendi, JPMorgan. Jose, please, could you open your mic.

Just a few questions, please. I think the first one, if you could comment on the momentum you're seeing on pricing and mix. Obviously, a strong start of the year in the first quarter. Are you seeing any signals of deceleration into the second quarter or second half of the year? How is that price mix momentum evolution, particularly when we look at the revenue bridge and in the light of the comments you're providing on the very strong product branches. Second question will be around inflation headwinds on the P&L -- you can remind us for 23, where do we stand in terms of the inflation headwinds. And three, a lot of discussion on electric cars. So I'd love to understand a bit better -- any additional comments you can give us on the demand you have for the current lineup, MEGANE, Zoe, Twingo, Dacia Spring as well as any updates on the Ampere IPO. Those 3 items.

Okay. Thanks for the questions. So first on pricing and mix. So clearly, the first quarter was very strong for us, as we had anticipated. So we see some of the effects that we had said would happen at the end of last year. So pricing continues to be very, very strong. No major price increases since the beginning of the year. So what we're seeing is the full impact of the price actions that we took at the end of Q4 and that we continue to enforce. We continue to tweak the discount rates with the dealerships, in particular on the Renault brand. So the variable marketing expenses continue to be a tailwind for us. What we see for the rest of the year from a pricing perspective is, this momentum will carry into the second quarter. Going into the second half, we will continue to have positive pricing. To offset, in particular, some of the ForEx impacts that we've seen and continued pressure from input costs, et cetera, which I will come back to. Gradually in the second half, price will become a little softer but still being a positive. So it will carry has a positive effect throughout the rest of the year. And we'll continue to work on the things that I just mentioned. So continuing to optimize the channel mix as we've done so far. You can see here despite some changes in the TIV from a channel mix perspective, we were steadfast in our position to stick to retail only, and we'll continue to do so. The second item is mix. And we had said when we did the 2022 publication that gradually with the new products that we're launching, pricing would be replaced by the product mix effect. And you can see that this is very apparent in the Q1 numbers. And this will continue to be the case throughout the year as the new products come online. The [indiscernible] will be a little tougher in the second half compared to the first half, but it will continue to be positive, especially with Austral continuing to ramp up. We're realistically still at the beginning of the launch for this car. It's very promising, but it's not at full speed yet. So that will continue to be a tailwind for us. And then Espace will come in the second half of the year, giving us further improvements. I think from a product mix perspective, we're seeing a lot of health from the LCV segment as well, which is also helpful, right? So price and mix together continue to be a strong positive and with a gradual shift between pricing towards product mix towards the end of the year, but perfectly on track with what we had said, if not a little better. Your second question was around inflation. So in the first quarter, we still saw the carryover effect of the cost increases that occurred towards the end of last year and some of the sort of compensation with suppliers, et cetera, and I'll come back to that later. It will continue to be the case in the second quarter. In the second half, we will see the effect of raw material starting to come down, start hit the income statement. You know there's a 3 to 4 months lag between the moment that the markets evolve from a pricing perspective. And the moment we feel it because of the contractual arrangements and our hedging policy, et cetera. So raw material becomes almost flat year-over-year in the second half. We'll continue to have the effect of sort of higher energy costs, even though the prices have come down a bit and the effect of the increase in labor cost Coming back to supplier compensation, we've seen a lot of announcements from suppliers on the percentage of our recuperation they're able to do that from the [indiscernible] I can tell you we're nowhere close to those levels. So we've seen 80% to 90% on the press, we're nowhere close to that -- but we will have some of that, obviously, in the second half. So long story short, inflation still quite a significant headwind in the first half, gradually getting better in the second half. So then the EV demand -- so look -- I'll start general and go into the specifics, if that's okay. I would say, generally speaking, what we see is that it's a market that's still not mature in a way. So the impact of government subsidies is still has an impact on demand. And the reality is end of last year and beginning of this year, there were cuts that were made almost everywhere in government subsidies. And we saw an impact of that on the markets. Pretty much everywhere where the cuts were made. January and February were pretty soft. We see a pickup in March. But clearly, the EV market is still dependent on subsidies. Now if I look at our performance on this market, the mix of EV vehicles for us in the first quarter is roughly flat to where it was last year. So in terms of our mix, it's basically stable. I would say the key cause for us in terms of our volume are mostly Spring and Megane E-TECH. Spring, I touched about in the speech a bit earlier on. The demand is still good. It's softer with the market a little bit, but it's still a very successful car. I think it has a unique positioning in terms of affordability, which makes it very attractive. So we've sold 110,000 of Spring so far and it's still on the podium of EV sales in retail in Europe. Now specifically on MEGANE, because I know there's a lot of questions on MEGANE. So first, -- what I'd like to say is the customers love the car. So the feedback that we're getting from the customers is that it's a great car. They love the infotainment system, the Google Automotive is perceived as a clear differentiator. People like the way the car drives. So the customer satisfaction is very, very good. right? And so our approach has been to favor that, right? So we've adopted a strategy, which is to tweak pricing by improving things like the financial package that we give when customers take financing in particular leasing because we have a strong leasing capability on this car. We've done things like give incentives on the wall boxes, et cetera, to make the deal a little sweeter. But we haven't and we don't plan to do any drastic price changes. Right? Our goal is to support the residual value of this car because most people buy it with the financing. And what's important for them is for the rents to remain competitive, right? And we feel like the rent is competitive. And in fact, the residual value of the car has kept making progress. When you cut price significantly, residual value takes a dip, right? And we don't want that to happen. We want to keep supporting it for the rent to remain affordable. So look, I would say -- if you look at the numbers, we've taken 54,000 orders in the car -- on the car since its launch in June. We took -- we registered 11,000 -- a bit more than 11,000 cars in the quarter. A couple of things, 52% of the orders we take are conquest from the competition. and crucially important for us is 38% is actually reconquest. So it's customers that we had lost to other brands that are coming back to Renault, thanks to Megane E-TECH. And for us, this is very important. So look, January and February were soft with the market. March is much better and encouraging. But our approach to this car is going to be the same. So we're going to keep working on customer satisfaction, supporting residual value, and that's the way we're going to stick to it.

Maybe just a quick add-on on Ampere if possible. Any update on the Ampere situation -- that was the last question I had.

Yes. So look, on par, from an operational perspective, the carve-out is progressing on time. So getting the teams reorganized to have the right level of focus, which is the primary goal, right, where the carve-out of Ampere is on track. So we'll have a carve-out that will be completed in the second half of this year. We're continuing to drive specifically the IPO process with the time line that we had announced previously. So with an earliest IPO towards the end of this year. And obviously, we'll look at market conditions, et cetera, to reevaluate constantly as you do when you're in that type of process as it goes forward. You all know that we're not under time pressure from a funding perspective or anything. So our intent is still to float this company because we believe strongly that we have a set of assets that are very unique and business proposition that's going to be very interesting for investors, but we'll adapt to market conditions. But right now, no change in the approach. I'd like to comment on the product development as well. Ampere is about MEGANE initially, but it's also about a range of 6 cars that will be launched between now and 2025. And these cars -- the development is perfectly on track. And we're very excited with the new models that are going to come out. The first of which is going to be SCENIC that will come out in the first quarter of 2024. SCENIC shares it's DNA with MEGANE, but it's a bigger car, a bit more roomy and we'll have a bit more range than MEGANE. It will come at a higher price point. So we're excited about this car because it's the first kind of C-segment SUV that will be fully electric in the Renault range. And then we'll have the Renault 5 which, as you can imagine, we're pretty excited about as well that will come further in the year -- in the third quarter of 2024. And this car's development is perfectly on track as well. We've done some -- as you've probably seen in the press, some trials, and it's a car that's very well received from a driving experience perspective. And then as you know, we'll have the other launches that will come in 2025. Ampere is also about developing assets for the rest of the range. So it will also serve the development of Alpine. So the Alpine version of the Renault 5 will also come out next year. So that will help Opel's revenue stream and Micra for Nissan. So look, we're on track, and we're still obviously very, very excited by the perspective that this business brings. We think it's unique on the market, and we look forward to the rest of the process.

We now have a question from Pierre Quemener, Stifel.

Coming back to the pricing and the BEV, obviously, the elephant in the room. In a drive to increase affordability and chase volumes, there's been a lot of noise around one of your BEV competitor, which has been fooling around on their pricing policy since the beginning of the year. This has very clearly concern on the BEV industry, [ fragile ] pricing discipline. We all concur that's a dangerous strategy and a painful one especially for customers having both cars ahead of price cuts. I guess my question is the following, do you consider your Megane EV flagship product as rightly priced versus competition in this context right now? So would you please confirm that we don't have to fear at this stage price cuts? And should you be forced to -- I would say, to tweak significantly down your pricing? Would you have kind of headroom to significantly tackle your cost base in order to be relevant to the market commercially and to remain profitable as well? That would be my first question. The second one is probably shorter. On the alliance, it seems from an outsider point of view, once again, but negotiation seems to take like forever. Another week out of the rumor about delays weighing on the closing of the new framework agreement of the alliance. Could you please elaborate a bit about where things stand and what is expected -- the expected time line to close things on your side?

Yes. Thanks. Look, on BEV pricing, again, for us, what's important is that the car is competitive from a rent perspective and, in particular, in our leasing offering. So that's what we're going to keep working, right? And we feel comfortable that we have a monthly rate that's competitive today, below EUR 400. So obviously, we'll keep working the competitiveness of the car as we've done so far with discount levels per channel, sticking to the right channels, et cetera. Again, looking at what we can do to make the financing package as attractive as possible. Look, we'll continue to drive the cost down. I think it's -- like all the rest of the range, we have our engineering teams and purchasing teams that are working aggressively together to keep working the cost positioning of the car. It's more difficult when the car is on the road than when you're working on a future car, but we feel there is still opportunity. So obviously, yes, we'll keep working that. Look, it's a car -- when you say headroom -- so I hate to get in this discussion because, again, our intent is not to cut the price. But it's a car that is attractive from a profitability perspective, on a marginal perspective. As I said, customers opt for the highest trim versions. They opt for the bigger electric motor and the bigger battery in 80% of the cases. They take financing. Financing penetration is 80% for retail. So it's a great profitability driver for us. And the reality is at the overall group level, the plants are full. We're at 100% capacity, generally speaking. So there is no big incentive to go cut the prices and kill residuals and go in the spiral that some of the competition is following. So we're going to stick to that. If it results short term into slightly lower volume, so be it. For the group overall, I think it's clear in the figures we showed you this morning, that the range is performing well. So it's not just about Megane, which is fine. But it's about Austral, which is doing well. It's about Arkana that's doing well. The Dacia range is on fire, as you can see. So no, it's not like we have a gun to our head or anything. Including for Opel, it's true for Opel, it's going to be the sole car at the beginning of it. But as I mentioned, Opel is about 6 exciting cars, 5 more than Megane in the coming 2 years. And we're very excited about Renault 5 and Renault 4 and Scenic, in particular, et cetera. So we're sticking to our guns. Yes. Sorry, the alliance, second part of your question. So the alliance is -- it's been the same story since the beginning. Our approach is a good negotiation, is a negotiation where everyone gets what they want, right? And in particular, Renault, in this case. And so we've never really communicated deadlines, but deadlines have been communicated on our behalf, I guess. The discussions we're having with Nissan are very constructive. There was an alliance operating Board last week where a portion of our leadership team was there, in particular, to work on some of these topics. And the discussions are making progress. And we're sticking to the time line, which is to have completed everything by Q4 of this year. But then you have to look at the time line project by project. So if you look at what we call Reload, so the operational projects, they go live as the development unfolds. We've made announcements already on India. Latin America is making progress. In the numbers of this quarter, one notable fact is the fact that partners revenue, which was a headwind for a long time, is finally a tailwind, and it's the start of what you're going to see going forward. And a portion of that number getting better is actually this quarter, us manufacturing a car on behalf of Mitsubishi with ASX, and we'll do it with Colt soon. And so all of this is indications of these projects moving forward. Micra, the Micra project is on track as well. If you look at the IPO of Opel and the investment of Nissan, that will be concluded at the moment of the IPO, right? We had always said that Nissan would invest in the IPO not before. So that's the time line for that. And then for the rebalancing, it's conditional to everything else happening, but it's moving forward. But significant operational projects, and we want them to be done in a perfect fashion. So it takes a bit of time, but there is no worry in terms of negotiation.

So you confirm that you can proceed with the 2 carve-outs that are -- that you plan now with Horse and [ Opel ] without, first, the new alliance rebalancing inside?

Absolutely. Absolutely. The 2 carve-outs are perfectly on track, and both of them will happen in the second half of this year.

We now have a question from Thomas Besson, Kepler Cheuvreux.

Thank you, Philippine. It's Thomas. We have a few questions as well. Firstly, can we start with inventories? They have increased. You explained why. Could you confirm if incomplete vehicles are not included in that number? And where you intend to land at the end of the first half and the end of the year, you plan to return to kind of 2015, 2019 leverage? Or should we expect you to stay below that level? Second, your market guidance remains unchanged. Markets have been more dynamic. I think that a lot of people were expecting maybe better supply. You haven't changed the market guidance. Is it a decision to stay conservative? Or do you see signals that demand is decelerating sufficiently not to raise that guidance? Thirdly, I'd like you to give us an idea on your BEV orders. Specifically, you said orders as a whole are 3.3 months. Could you give us an indication of where the BEV orders stand? And lastly -- sorry, it's 4 questions. I'd like you -- it's a question more for Denis here to give us an idea of the impact of Dacia on price/mix. So how much did Dacia [ ASD ] changed? Or what was the price/mix versus Renault group? And what's the time line for the new C segment products or D segments sold at C segment products for this year?

So thanks for the questions. So I'll start with inventories, and yes, I confirm there is an amount of incomplete that is in the group inventory level that you see in these numbers. Again, the reason we're doing that is despite the fact that electronic components availability is better, it's still pretty erratic from a deliveries perspective. So to avoid having peaks and troughs in terms of production and to keep the production as smooth as possible, we are doing some incompletes. So we're talking a few tens of thousands of incompletes at the end of the first quarter, and we intend to be at pretty much 0 at the end of the second quarter. Taking the root causes separately, I think on the rest of the OEM inventory, which is really the part that went up since December, the rest is delivery headaches and shortages from a logistics capability perspective. We're still in a situation where we have a whole room with people looking at 24/7 for opportunities to find trucks and trains and boats. It continues to be a struggle. From a trucking perspective, it was better in March, but still far from being normal. We do anticipate overall OEM inventory to come back down towards the end of first half to something closer to the levels we were at during 2022, right? On the dealer side, the level of inventory is primarily driven by the fact that we're trying to get through our order book. And the dealer inventory is completely sustained by the order book we've got. We're talking slightly above 2 months of our inventory at the dealerships when we have 3.5 months of order book. So that's what we're going through. No, it's absolutely not a commercial thing. It's an execution thing to get the cars to the final customers. It should get -- it should improve by the end of first half, but I don't think we'll get back to the inventory levels at the dealerships that we were at in '22, which was abnormally low due to the electronic component shortages that we've seen, right? So our target is to get back to around 2 months of forward coverage in the dealerships, and that's what we're going to be working through. So that's the explanation for the Q1 inventories. For the guidance on the market, maybe I'll hand over to Fabrice and Xavier afterwards for more specific comments. But I think we want to remain relatively conservative in terms of our views of the market. So far, we've seen some vitality, for sure, in the first quarter. March was a little slower than January and February. But we don't want the teams to get super excited about markets carrying the performance. So we stay relatively conservative from an inventory perspective. Fabrice, Xavier or Denis, I don't know if you want to add anything from your side.

Guidance was Europe single-digit growth and international flat. What we see up to now is that we are slightly better, though there is perhaps a potential but to be confirmed in the coming months.

All right. So on the BEV order intake and the BEV order book, it's lower than the 3.3 months overall average, but it's still pretty healthy, right? It's north of 2 months for the car. So no specific tension on this at this stage. Now on the impact of Dacia on the pricing element and the product mix, so the product mix bucket of 5.2 points, this is almost entirely driven by Renault, primarily Austral, Megane and LCV. On the pricing side, I would say it's roughly proportional to the 2 brands, right? So we see the same level of health, both on the Renault and the Dacia side. We see the same phenomenon of sort of trim and version mix being favorable both on Renault and on Dacia. And so I think a good way to look at it is to take proportional contribution from the 2 brands. The timing of the C segment cars on Dacia, so Duster, new Duster will come in 2024, H1 2024. You want to comment, Denis or Xavier?

No, if you wish. No, just on your question, the momentum for '23 is very high and will be sustained, as was said, by the new brand identity, by the extreme, and by, of course, the development of the Jogger. So we will have mix inside the year. And to your question, Thomas, H1 '24 will be the time for the Duster. And a year after H1 '25 will be the time for the Bigster. So we have a continuous story here on growing on the C segment.

And I can tell you, we can't wait for these cars to come online.

Thank you, Thierry. So now we have a question from George Galliers, Goldman Sachs.

Just to quickly follow up on the inventory point and your answer to Thomas' question. Can you just confirm you include incomplete vehicles in these inventory numbers? And when we say incomplete, I presume these are pretty much finished vehicles with just 1 or 2 components still missing. Is that correct?

Yes, that's absolutely right. The incompletes are in the graph that has the 2 lines, right, the OEM inventory and the independent dealers. They're obviously in the OEM side because we don't recognize revenue on incompletes. And you're absolutely right, it's cars that are missing a couple of components that we take through the manufacturing process, we store, and then when the components become available, we retrofit them. And the reason we do that is that it's more cost effective to do this than have shutdowns in the plants and have to do a stop and go from a manufacturing process. So we did it throughout last year. We started doing this, I want to say, towards the end of first half of 2022, and it was a smart decision because it allowed us to restart the second half of 2022 with a healthy level of inventory, which is what we're doing today. And typically, we try to squeeze that out before there's a yearly point or a first half point. And this is what we'll do again in the second quarter.

The second question I had was just revisiting on the Megane volumes. I think you've already articulated that EV demand has been volatile in part due to changes in government subsidies. When we think about a normal vehicle that Renault launches, I presumably go through a ramp phase. We then have several quarters where you're running at high volumes before the vehicle starts to age and then tail off. Where is the Megane in that process? And given the increase in EV penetration across Europe, do you expect to see that tailing off that we traditionally see on product? Or actually, can the volumes be sustained for a longer period of time? And maybe I'll just ask the third question I had at the same time, which is regarding Mobilize. You did comment that the higher revenues were in part due to higher interest rates. Presumably, this is reflecting higher cost of funds on your part as well. When we think about that in terms of profitability, is this net neutral? Or are you passing through the high cost of funds with a lag?

All right. So Megane, it's still a fresh car. So it's not -- we launched the car less than a year ago. So it's still in a phase where typically, a normal vehicle at this age would be in development phase, right? So it's a car that is still a relatively new car in the range, not aging by any stretch of the imagination. In particular, due to the fact that it has some pretty innovative and unique features from a connectivity perspective in the range, and the customers love that. And so that's where it's at. So if it isn't for sort of subsidies and external factors, it's a car that would still be in ramp-up, clearly. On your second question on interest rates. So the way we run Mobilize Financial services is also -- is always geared towards making sure that FinCo is funded in the most sustainable fashion possible. So our funding sources tend to be fixed rate. And we've got more than half of the funds -- of the funding at the FinCo that comes from customer deposits, right? Because we want to be able to support the OEM whatever happens from a market liquidity perspective. So the result of that is that we're less sensitive to rate fluctuation than if we did sort of short-term funding on the markets. So we were penalized by that when rates go down because our rates -- our funding cost goes down a bit slower. But when rates go up, we're -- we have an advantage because there's a time lag between the moment the rates actually increase and the moment we feel it. The way we work with that commercially is, typically, we want to pass on the rate increase to the consumers while sort of maintain the profitability at the same level. So it's typically type of -- kind of a pass-through type of arrangement. So we don't typically benefit from rate increases. There is sometimes a little bit of timing, but typically, it's a pass-through.

We now have a question from Pushkar Tendolkar from HSBC.

Yes. I have just one question. This question regarding Slide #5 in your presentation. I think this is a slide which you typically have been showing in your presentations for at least 4, 5 quarters now. The high trim mix, if I remember correctly, was used to be around more than 70%, at times, 75%. This time, it's around 60%. I just wanted to check if that's a sign of customers now lowering the content of what they ask for just to balance the leasing rent. Is that a fair assumption?

Yes. No, it's -- look, there is an amount of chartsmanship on this figure. We take the lowest amount for all the new launches, right? So depending on the timing of the launches, et cetera, it fluctuates a little bit. There's no sign of weakening. I think there's a little bit of timing in terms of the maturity of some of the launches, but it's great news. Look, I mean the demand is very, very clearly for the high range of the vehicles. Fabrice, do you want to comment specifically on the [ hologram ]? And then maybe we can talk about...

I would say our high mix are really sustained by, first of all, engine mix with full hybrid and also by [indiscernible] special version. No weakness on that on the contrary.

And Dacia is confirming. Because what's happening at Dacia is that we are meeting the times, and we have more and more people -- the market is following all the price increase for the last 24 months. And we see more and more new people coming to Dacia making choices. And these people are coming from mainstream, and they usually buy very high trims when they come to us. This is new to us. And this is, by the way, the reason why we did the extreme kind of trim to attract these people, and this is working well. So our trims are getting higher by the month.

And I think that we have a final question coming from Horst Schneider, Bank of America.

Yes. I've got a few left. The first one relates again to the Megane E-Tech. Maybe I get something wrong, but when I look at your Q4 presentation 2022, you show that you have collected something like 49,000 orders since launch. And now you're saying you have launched -- you have something like 54 [indiscernible] since launch. Does that imply that in Q1, the total order intake for the Megane E-Tech was just 5,000 units. I think I'm reading something wrong, but I think it's worth asking. This question that I have is some carmakers have announced EV penetration targets for 2023. Have you got also a penetration rate target? Or respectively, how many EVs you need to sell this year in order to achieve the CO2 emission targets in Europe? And the last one that I have relates again to the order backlog. Now the supply shortage is clearly improving. Is it your aim going forward to work down the order book as soon as you can in order to bring it down to an acceptable level or you rather want to keep it at something like 3 months of sales in order to protect the pricing a little bit better or even better? I mean it is great, therefore, just even better.

Thanks for the question. So on the 54,000, in fact, the figure that we had quoted in the release of the '22 numbers was a figure end of February. So the 49,000 was end of Feb, right? So the 5,000 difference is not a quarter.

So what was the order intake in Q1? Can you comment on that? Or is that too detailed?

It was a lot more than the 5,000 that you just highlighted. So we keep getting the orders online. On the EV penetration rate, look, we don't have -- so first, as you know, we don't force volume targets to the different segments. And we've got no short-term pressure from a CAFE emissions perspective because it's a factor of not only the EV part of the business, but also the hybrid segment. And you can see that the hybrid segment is working very, very well. Jogger is off to a very, very good start. I think it's already 25% of the mix. And frankly, it's conditioned by the availability of components as well. I think there's opportunity for that mix to continue to improve. If you're a consumer looking for an affordable hybrid today, Jogger is a pretty compelling proposition. So we're excited about that. The intake on Austral, as I mentioned, is above expectation, so that's great. And we'll have Megane coming in the -- I'm sorry, Espace coming in the second part of the year, which will help as well because it will also come in a full hybrid mode. And then we have Kangoo EV coming. So there's no pressure to hit a specific EV number. In the mix today, as I mentioned previously, EV specifically is about flat versus last year. And then the order backlog, the last part of your question, again, we stated a few times that our sweet spot is 2 months of inventory, 2 months of order book, right? And that's what we're trying to get to. So if we can get logistics availability and components availability to gradually work our way down the order book, that's where -- what we're going to do. Fulfilling orders, happy customers and cash coming in for us. So clearly, we're trying to do that. And based on what we see so far, even with an order intake 30% below 2019 levels, we will not get back to 2 months of order book before 2024. So we'll be above -- clearly above until the end of this year. And then as you know, in the following year, we've got new product onslaught coming. So we're still in a fulfillment mode as opposed to just commercial [ concur ].

The last one maybe that I want to sneak in is on emerging markets. Because we see that you have lost market share a little bit in emerging markets, therefore, geographic mix was stronger in Q1. Is that a pattern that we continue to see in the rest of the year or you aim to boost again your market share more in emerging markets when the supply shortage improves now?

I think there is an element of that phenomenon, which is due to our prioritization of the most profitable countries with the situation of the shortage, et cetera. The performance in Europe is very strong. Part of it is also sort of the schedule of new product introduction. We have a lot of new products coming for emerging markets in 2024. So we'll see a ramp-up into the next year. But again, we run the business on a daily basis based on maximization of margin, not on maximization of market share. And just on the order book, I wanted to come back to one specific point because there's been a few questions on level of inventory. Clearly, a portion of the order book is still driven by our capacity to get the electronic components on time. The incompletes -- getting through the incompletes will help us with that. To give you an order of magnitude, because I think we need to be transparent on this, we -- at the end of Q1, we had about 50,000 incompletes. So getting through that will be helpful.

We just received the last written question by Philippe Houchois, Jefferies. He wanted to ask about our inventories. Can you say how many units are incomplete?

I just answered that. So it's about 50,000 at the end of Q1. Yes. Okay. Well, thanks very much, everyone, and I look forward to speaking to you in the coming days as we go through the normal communication process. Thanks for joining. And hopefully, you saw that we're very encouraged by the first quarter performance. Thanks very much.