Renault SA (RNO) Earnings Call Transcript & Summary

Good morning, everyone. We are pleased to welcome you for our presentation dedicated to our Q3 revenue with Thierry Pieton, Group CFO; Fabrice Cambolive, CEO of Renault brand, Denis Le Vot, CEO of Dacia Brand; and Xavier Martinet from the Dacia team. Thierry, the floor is yours.

Thank you, Philippine. Good morning to all, and thanks for joining us this morning. I'm pleased to comment today on Q3 revenue and commercial performance, but let me first give you an update on the strategic and commercial developments that took place over the last quarter when dilution is moving ahead quickly with several projects that we're rolling out at the same time. So let's start with Horse, our business dedicated to ICE and hybrid powertrains. The carve-out was completed on July 1. Day 1 was a success with -- we had 9,000 employees, 8 factories and 3 R&D centers that were transferred without a glitch. On July 11, we signed a JV agreement with Geely. The closing is expected in the upcoming months and will lead to the deconsolidation of the Horse entities and the start of the new JV. At the same time, we're pursuing our fruitful discussions with Aramco, who has also joined the NewCo in the coming months. Let's move on to Ampere. The carve-out will be completed in 2 weeks from now. On November 1, Ampere will be a dedicated entity, 100% focused on EV and on software. The carve-out provides for us unique conditions to accelerate our work on performance and innovation. It also very clearly enables us to better identify cost reduction levers. Between our current generation of vehicles and the next one, as you know, we will reduce cost by 40%. This improvement will continuous and the benefits will materialize on vehicles in production and in upcoming launches. All of this will be covered in detail during our first Capital Market Day, which we have announced will take place on November 15. In September, we revealed Scenic, which is the second car of Ampere's EV offensive at the heart of the European market. With Scenic, we will offer the European families an all rounder EV, able to become the first car of the household. Scenic is a high-tech car with benchmark connectivity, thanks to Google Automotive Services. It has best-in-class range with up to 625 kilometers WLTP. It's well positioned from a pricing perspective with an entry price at around EUR 40,000, less expensive than key competitors and already has a TCO, meaning a total cost of ownership, on par with hybrid cars. In addition, this car is the flesh and bones materialization of our ESG strategy. It's a car born with a purpose, which increasingly matters, especially to our fleet customers. It's built with up to 24% of recycled materials and up to 90% recyclable. Its great auto grade CO2 footprint is significantly lower than EV pure players. With Scenic, we're demonstrating that we can offer a product with best-in-class specifications at a competitive price, and this car will be on the road, as you know, early 2024. Let me now take a minute to speak about the Flexis project, which we announced a few weeks ago. For us, this is a true game changer in the path of electrification in the LCV world. As you know, Renault Group is already a leader in LCV, and Flexis is our answer to address new trends for this fast-growing market in Europe. Flexis will develop and produce Flexi-Van which is a breakthrough LCV in at least 3 ways. First of all, it will be the first car to use our new software-defined vehicle technology, which enables the vehicle to remain up-to-date throughout its life. This technology will improve its business performance through monitoring our delivery activity, enabling reduced loading time, route optimization, improved vehicle fill rate, onboard predictive maintenance, et cetera, et cetera. Secondly, its fully electric LCV skateboard platform will offer high modularity for different body types at a low cost and will be breakthrough from a safety perspective. All in all, it will enable a 30% total cost of usage reduction for logistics players. Renault Group and Volvo have signed a binding agreement to launch a new company with an initial 50-50 equity split. CMA CGM Group, would also join the new company with the closing expected early 2024. Flexis relies on the strategic assets of the 3 partners. We're bringing the industrial expertise, the know-how in LCV, in EV and in software-defined vehicle. Volvo Group will bring B2B relationships with logistics players, its whole suite of truck services transferable to LCV and its international footprint. And CMA CGM will bring its logistics ecosystem expertise, its customer network and the ability to co-construct new services adapted to end-to-end supply chain. This cooperation will open significant innovative new market opportunities for Renault Group in LCV with optimum time to market and shared investments. I'll conclude these highlights with a brief status on our agreement signed last July with Nissan. That will be effective by the end of the year. At this point of time, 28% of our Nissan shares will be transferred to a trust and will become monetizable. Of course, a sell down will be coordinated with Nissan as they have a right to offer but we'll be free to sell when we deem appropriate. Let's now switch on sales and revenue for Q3. Group revenue was up 7.6% in Q3 at EUR 10.5 billion. At constant exchange rate, it was up 13.8%. Mobility Services amounted to EUR 11 million, up EUR 2 million compared to last year. Mobilize Financial Services revenue increased by 36.4%, mainly driven by the rise in interest rates and higher average performing assets. In the first 9 months of the year, group revenue was up 21.1% to reach EUR 37.4 billion. It was up 25.3% at constant currency. Let's now focus on the Automotive revenue. Automotive stood at EUR 9.4 billion in Q3, up 5%. At constant exchange rate, it was up 11.3%. The negative exchange rate effect of minus 6.3 points is mostly linked to the Argentinian peso and to a lesser extent to the Turkish lira. Let's take a look at the different drivers of this evolution. The volume and geographic mix buckets were together positive at 1.5 points. Volume-wise, the group registered 511,000 units in the quarter, a 6.1% increase in the third quarter of '22. Over the first 9 months of the year, the group sales reached more than 1.6 million units, an 11% increase with Renault up 11.4%, Dacia up 16.7% and Alpine up 15.9%. Back to the quarter. From a geographic standpoint, sales in Europe were up 15.3% at the group level, driven by a very strong performance of the Renault brands, which rose by 25%. This clearly demonstrates the success of our new launches. This led to a higher mix of European sales and explains the positive 3.1 points of geographic mix effect. Renault brand global sales were up 11% and again, plus 25% in Europe versus Q3 '22. Renault confirms its ranking as second best-selling brand in Europe with the first base both in passenger cars and LCV in France. Renault continues to outperform on the LCV market. Sales were up 21% worldwide and 25% in Europe on the 9 months. Renault is the European leader on the commercial van market. Dacia sales were up 2.4% worldwide. In Europe, Dacia sales were up 1.6% to 127,000 units on tough comparatives. Dacia is ranked #2 for retail sales in the region. Alpine sales grew by more than 30%, thanks to the continued momentum on A110, supported by limited editions. Despite the 6.1% growth in retail sales, volume effect was negative by 1.6 points. The increase in registrations was offset by a higher destocking in the independent dealers network in Q3 2023 compared to Q3 '22, with components and logistics conditions getting back to normal. Indeed, global inventory stood at 542,000 units in September compared to 569,000 units in June with a strong destocking this quarter at independent dealers, which were down 93,000 units since June. This dealer destocking more than compensated the seasonal increase of group inventories. The overall improvement is in line with our objective of being below a total level of 500,000 units at the end of the year with an acceleration of the drop that will take place in the fourth quarter. This level of inventories, again, is supported by a high proportion of vehicles that are affected to customers and should also be in perspective with a still high order book, which stands at 2.5 months of forward sales. This will remain, by the way, above our targeted level of 2 months until the end of the year. Looking now at the product mix effect, it was muted in Q3, which is counterintuitive in the product launches that we've had since last year. It mainly results from strong sales of Clio phase I with the revenue per unit lower than the group's average. In addition, Megane E-TECH invoices were lower this quarter compared to last year due to the destocking effect that I already mentioned. These 2 effects had the strong positive in fact -- impact, sorry, that came from Austral and from Espace. Price effect was still a strong positive at 7.5 points. As you know, this price effect started to ease, mostly due to tougher comps and less pressure from raw materials. Nevertheless, it will remain a strong revenue growth driver throughout the last quarter and beyond. This increase mainly comes from our commercial policy focused on value. It also integrates our actions to compensate exchange rate impacts. As in previous quarters, our pricing effect is driven by our performance in the following areas: firstly, a continued discipline and channel mix. The Renault brand keeps a healthy channel mix with 1 in 2 sales to retail customers in Europe; secondly, a strong control over variable marketing expenses and incentives to dealers; and finally, the continued favorability of our trim mix, thanks to the attractiveness of. Let me give you an update on the product supporting our performance. First, Megane E-TECH is still the #1 EV of its segment in France in the third quarter and accounts alone for 2.2% of the BEV market in Europe. It remains a compressed product in Europe with around 60% of our clients, which are new to the Renault brand. We sold 35,000 units year-to-date, of which 70% are high-trim versions and over 80% are equipped with the most powerful powertrain. We remained focused on value even in this challenging environments and on customer satisfaction and residual value. The residual value of Megane E-TECH rose by 2 points since the beginning of the year. Month after month, Austral confirms its success. Thanks to Arkana, Megane and Austral, Renault brands grew by 24% on the European C segment in the third quarter. As an illustration, Austral took the lead of the C-SUV segment in France, which is an important signal for the brand. Sales amounted to more than 60,000 units year-to-date, 65% of which were E-TECH hybrid and 60% in the high-trim versions. Austral is progressively still being commercialized in all targeted countries. Most importantly, financially, Austral delivers the greatest passenger car contribution margin per unit in Renault Brands' history. However, this record will soon be beat by Espace, which was launched in June and that you can see in the next slide. Espace is an important conquest product for the D segment for us. It shares 80% commonality rate with Austral, thanks to the family program initiated by Gilles Le Borgne and his team. This is one of the key drivers explaining why the contribution margin for this vehicle is so high while we reduced its selling price compared to the previous generation. Espace sales have just started, but the car is off to an encouraging start and will clearly support our margin development in the coming years. The third quarter was also marked at the start of sales of new Clio, the phase II. The bread and butter of the Renault brand is posting a higher contribution margin versus the previous generation, thanks again to significant cost improvements. Its hybrid version will further complement the group's electrified offer. Worth highlighting that the while ramping up progressively Clio phase II, the phase I enjoys a remarkably strong end of life, as you saw in the mix explanation. This Renault lineup will be strengthened by important launches for Europe but also for international markets. Fabrice Cambolive and his team will be pleased to unveil the Renault brand International game plan on October 25th during a live event. Let's now take a look at the Dacia brand. Dacia pursued its good momentum in Q3, supported by the new brand identity. The new Extreme trim level launched at the beginning of the year, and simultaneously on all vehicles is working well, representing now 1/3 of orders across the entire range. It attracts new customers and generates incremental contribution margin on already very high levels. Dacia Jogger Hybrid 140, which was launched in January, represents 1 out of 4 Jogger orders despite component supply constraints and longer lead times. It's an excellent illustration of Dacia's smooth electrification strategy. Dacia Spring, 100% electric, recorded close to 16,000 sales in Europe in the third quarter of '23. Year-to-date, it reached more than 43,000 sales. It was again on the podium of retail electric vehicles in Europe last quarter being the most affordable BEV on the market. All in all, Dacia continues to grow, and we look forward to the launch of New Duster in 2024 and which will be revealed by the end of the year. It will ensure the continued success story of our already double-digit operating margin brand. To finish the analysis of the Automotive revenue change, our sales to partners contributed positively to 2.9 points this quarter, benefiting from the production of ASX for Mitsubishi Motors, illustrating the common projects that we're restarting with the Alliance. We also benefited from a dynamic LCV market, driving ourselves to Nissan to Renault Trucks and to Mercedes Benz. Now let's comment on the performance of Mobilize Financial Services. New contracts increased by 5.1%, reflecting the higher level of registrations. Thanks to the group's net pricing policy, the average financed amount significantly increased and total new financing rose consequently by 15.9%. The average performing assets follow this trend with a 15.6% increase at EUR 52.1 billion, driven by higher new finances -- financing, sorry, and the return to more normal dealers' inventories after the electronic components crisis. As a result, Mobilize Financial Services revenues were up 36.4% to EUR 1.1 billion, mainly driven by the effects described above, in combination with higher interest rates. Moving to Slide 24, we confirm our guidance for the full year 2023, with an operating margin between 7% and 8% and an operating margin that's expected in H2 to be above H1. Free cash flow above EUR 2.5 billion. All in all, we're confident in the achievement of our targets this year and in our ability to continuously improve our performance beyond that. We'll benefit from the full year effect of the vehicles that were launched in 2023 and the numerous launches that will take place in '24 and '25. These new launches will also benefit from our significant efforts to reduce costs and will, therefore, deliver much stronger contribution margins than the previous generations. This concludes my presentation. I'm now ready to answer your questions, and thanks for your attention.

Thank you, Thierry. So we'll start the Q&A question with Thomas Besson from Kepler Cheuvreux.

Yes, I hope you can hear me.

Thomas, yes we can.

Okay. I have 3 very quick questions, please. First, I'd like to go back to the gap between newer volumes of registrations in Q3 and what we should expect in Q4. Since last year in Q4, you ended with, if I remember [indiscernible] units. So I think it's going to be a difficult one. Should we expect to get a bit negative gap between the new registrations and [indiscernible] for [ fourth quarter ], is the first question. The second question is on the BEV mix, it has declined because your overall volumes have increased faster [indiscernible] level. And you have a lot of launches between [indiscernible] and all the other [indiscernible] for next year. When should we expect the BEV mix, as a proportion of total to start picking up? Is it already in Q1 or more in the third quarter once you have the volume products that are launched? And third and last, just a question, which is not exactly linked with revenues, but financial services -- or Mobilize Financial Services revenues have increased very sharply, 36%. Can you just remind us with the big increase in Europe of long-term rentals or some form of [indiscernible], whether the risk carried by the financial services operations is still contained to the U.K. business or whether you progressively have to transfer part of that risk to the bank?

Thanks, Thomas, for the 3 questions. So on volume versus regs. So basically, if you look at Q3 specifically, last year, between June and September, there was a decrease in dealer inventory of about 45,000, 47,000 units, I think, in total. We were still in a period where availability of components was becoming more free, and therefore, the reduction in dealer inventories was not so high. We announced this year that we were targeting a reduction of inventories to below 500,000 units. And we started doing the work in the third quarter. And therefore, in the third quarter, dealer inventories decreased by 93,000. So year-over-year, that's about 40,000 net-net variation or variation decrease. And that explains basically the gap between the registrations and the volume, which again is very much in line with the plan that we had laid out to the team and our target to get back to 2 months inventory 2 months order by the end of the year. So in terms of what we look at for Q4, you're absolutely right. In Q4 of last year, dealer inventory had increased 160,000 units. And that, again, was due to a combination of more free access to components and already at the time, logistics issues. This is not going to happen again in the fourth quarter of 2023. You can see where we're at now in terms of dealer inventories and reduce total inventory to less than 500,000 by the end of the year. So there will be, again, a disconnect between registrations and billings in the fourth quarter, and we expect to have a negative volume effect in the fourth quarter. This will turn around in 2024 because we will be at the level of inventories that we've anticipated and we'll start getting volume again from an invoicing perspective, thanks primarily to the product launches in Europe. So your second question was on BEV mix. In fact, that mix was actually pretty stable, if not a slight improvement in the third quarter year-over-year. So our BEV mix is at 11% at a total group level. And it's driven by improvement both on passenger cars, but also on the LCV side. So LCV BEV was up 46% year-over-year. So it's actually pretty stable. And it's interesting because we're kind of in a transition phase from a BEV volume perspective because we have Megane which is basically first vehicle in the Ampere range. But let's say, ZOE and Twingo are rather at the ends of their life cycle. And we haven't yet launched the new BEVs that will come. Despite this, what we saw with the performance of Megane that's pretty stable. We saw Twingo EV actually with strong performance in the third quarter, and the order intake was actually pretty good. ZOE is trailing down. This is clear. And I mentioned Spring, which has had a very good performance in the quarter with 16,000 registrations. So despite some of our range being end of life, we still have a pretty stable BEV mix. This mix will start increasing in the first quarter of '24. But I would say, in a more significant fashion in the second quarter since we're introducing Scenic. Scenic will come towards the end of the first quarter and it's really the next step in our BEV lineup. So expect BEV penetration to start really increasing in release quarter with the launch of Scenic. We'll have the launch of Renault 5 coming towards late Q3 and then the Alpine version coming very late in the year, and gradually, the penetration will keep increasing. So your last question was on Mobilize Financial Services. So yes, Mobilize Financial services was up 36%. There is a change of mix towards long-term rentals. We carry some of that risk on our balance sheet, not only in the U.K. In total, our long-term rental portfolio is around 400,000 units at this stage. It's something that's going to continue to grow. I would say we've always had a very prudent in terms of our anticipation of residuals. So we would never arbitrarily fix residuals without good data, and we typically take a certain amount of security versus the external data that we've got, and we'll continue to do so. So clearly, there's an evolution towards that business, and we'll keep supporting it with prudent assumptions. One thing I want to add to that, though, is as we roll out the new vehicles, the residuals are actually improving. So we actually got on the Renault brand, I think, almost 3.5 points of residuals year-over-year, which is a positive. I mentioned the improvement in residuals of Megane. So look, we'll keep watching it, but we're typically very, very prudent and we'll keep going after that business, which is clearly very attractive, especially for BEV customers.

We now have a question from Pushkar Tendolkar from HSBC.

Yes. I have 3. So the first one on the order development. If you can just talk us through how orders have developed in the third quarter sequentially compared to the second quarter. And more importantly, how the mix within those orders has been in terms of trim and channel? Then just continuing on the topic of mix, the indication probably at the start of the year was that through 2023, the mix effect would take over from the pricing effect. The pricing remains strong, but that mix improvement probably hasn't happened. So is that a case of something that you kind of overestimated in terms of mix? Or it's just got pushed to the right? Those are my second -- sorry, the second question was again about -- so 2024, I don't want to get into numbers, but historically, you have tried to offset raw material headwinds with price mix enrichment. Now when in '24, you kind of have a raw material tailwind, would you still say that you can maintain that raw materials or cost inflation versus price mix enrichment at a neutral or a stable level? And then just last set of questions on the alliance. You have ended the purchasing agreement with Nissan. Is there any financial impact of that from -- that sits in your productivity bucket? And also Nissan has recently I think increased their targets for BEV penetration in Europe to 100% fully electric by 2030, which is the same as what Renault targets, the Renault brand targets. So do you see more projects -- this project-based cooperation happening with Nissan in the later half of the decade?

Sure. More like 6 questions than 3 to me by the way. But no problem. Thanks for being here this morning. So I'll start with the order intake. Hey, look, I would say realistically, we're still in tough markets. So we're still in a situation where we're talking markets that are 30%, 35% down versus where they were prior to the crisis to 2019. So in terms of evolution, I would say, if anything, year-over-year, Q3 was maybe a slight improvement versus the first half of the year, but still over a pretty bleak situation, I would say, generally speaking. I would say one thing that we've seen is that this pickup in the third quarter from an order entry perspective for the market seems to be a little more driven by nonretail channels. So some returned fleets and demos, et cetera. We haven't followed this. As you can see in some of the comments that we've made, we've remained very faithful to the retail market because that's just the phase we're in from a product launch perspective. It doesn't mean, by the way, that we're not open to doing some fleets provided that the returns are interesting, okay? And so we'll keep looking at the evolution in the market towards the end of the year and next year. But that's how I would describe it. A tough market with maybe a very slight improvement in Q3, but with some of it coming from fleet and we've stayed out of that so far. From a mix level though, and thanks for asking specifically that question, our order intake is very good. And candidly, it's all the metrics that I mentioned on the mix of the higher powertrain on Megane, the higher trim levels on Austral, even still on Arkana, on Megane. The fact that we've got now 1/3 of the mix in Dacia coming from the Extreme trim level. What we see from a backlog perspective, it's very good from a quality standpoint. And that's really been a constant over this year. And I think it's clearly linked to the product activity that we've had. For your question on the mix impact, so as I mentioned, it's not really a surprise in terms of things being disappointing. I would say it's more of a surprise in terms of Clio doing better than what we expected. So we've got a vehicle with Clio that has an average revenue per unit that's lower than the rest of our -- the average of our range and it's actually performing very well, even the phase I, which is actually starting its phase out. And that's compensated some of the very positive effects that we had anticipated on Austral and on Espace. The other thing I'd say is we're talking about revenue now, but the mix level on operating margin is a different story. And whereas on revenue, Clio has a negative impact in terms of our revenue mix. From an operating margin perspective, we worked very, very hard to simplify the range of Clio to reduce its costs so that we would be able to launch the phase II with a lower price for the consumer, but with a much improved contribution margin, right? And we'll keep doing that. I stated also the example of Espace. The Espace is cheaper than the generation, but it makes a contribution margin that's, candidly, multiple times the contribution margin of the previous model. So we'll keep seeing a little bit of this effect of Clio, but gradually, we'll get back to a situation where mix will become a positive driver on revenue again and certainly will stay a positive driver from an operating margin perspective. Then your third question was on our ability to continue to have sort of mix plus pricing offset raw material and productivity. The short answer is yes. And clearly, we're reaching the maximum from a pricing, I think, with our less necessity to cover raw material increases. The one thing that we'll keep doing from a pricing perspective is offset FX like we've done this quarter, but price should stabilize. Mix, I already commented on, will be a positive, thanks to the product launches. Cost should get back to being a more positive driver in the coming months and years. So yes, absolutely, we'll keep doing the margin expansion from an operating perspective. And then your last question was on the alliance with Nissan. So the short story is, no, there's no short-term impacts of the change in the alliance agreements. So first of all, technically, the move that we do to transfer the shares or 28% of the shares to a trust doesn't have any impairment issues or implications or anything like that. From an accounting perspective, we have to record an impairment when the sale of Nissan shares becomes probable within the next 12 months, right? So it's something that we'll assess on a constant basis and take the impairment as we go. But we don't have to take a full impairment on the ownership because of the change in the trust. I think maybe your question was relative as well to the announcements that we made on the purchasing organization. And I think the answer is rather than it should have a positive impact. The way I look at it is you have 2 ways of making synergies with Nissan. One is trying to squeeze a bit more from suppliers by saying, we're buying the same part on a Nissan Rogue that we're making in Japan and an Austral that we're making in Spain, which is really hard. Or you can say we're going to design, manufacture and source a car for both companies in the same, right, like we do on Micra and Douai. The benefit that you get from having the project done in common from the design phase through manufacturing is way higher than the synergies that you get from trying to squeeze a bit more volume from the suppliers, especially in an industry that's getting more and more high-tech, more ESG conscious where you need to have a network of suppliers that's pretty close to you, et cetera, et cetera. So from my perspective, the name of the game becomes how do we maximize the number of projects that we do together, which is the last part of your question. And I think, absolutely, yes. We have now Alliance operating Boards every second week. And most of what we talk about is the projects that we're going to do together. We've announced a large number of projects already. I stated Micra. I mentioned in the speech here, ASX and Colt with Mitsubishi. We'll do more projects going forward and those will come with significant benefits from us. More to come on that topic.

We now have a question from Daniel Roeska, Bernstein.

A couple of questions on the Ampere IPO if I may. Considering you're still thinking about this, how are you thinking about the risk of value dilution to existing Renault shareholders given some of the examples we've seen in the industry, maybe what's your pitch that this will be accretive to Renault shareholders?

Yes. Look, I think there's a couple of elements to that. So first, there's the fact that we're separating Ampere. At the end, I think for our shareholders, our responsibility is to make the business as successful as possible. So to put into Ampere, the best possible conditions to make that business successful. Ultimately, that's what's going to generate shareholder value, both at the Ampere level and at the group level. So what we're doing is separating Ampere so that we have people that work on EV all day, and we're really starting to see the benefits, and I mentioned the cost element, et cetera, and I'll come back to that maybe later in the discussion. But clearly, that's already starting to pay off. This is linked to the IPO in the sense that the IPO is taking that accountability and that responsibility of the management team of Ampere to the maximum level. It's one thing to be a business unit in a group, right, and to be accountable for a set of financials, et cetera, et cetera. It's another thing to be a fully independent publicly listed companies with the scrutinies of people like you, of the shareholders, of a separate Board, et cetera. And jokingly, I say it's kind of like when your kids grow up, first, they have a separate room and they start managing their day-to-day life. But then when they leave the house and have their own apartment, that's when they start being really responsible for what's going to happen, right? And the way I look at Ampere is a little bit like that. On the technical dilution part, I think for us, Ampere gives optionality to some of our investors for sure. However, it appeals to different categories of investors as well. People who are buying more the growth story of Ampere, the technology story. If you look at the partnerships that we're building in Ampere today, if you look at Qualcomm, Qualcomm would never have invested in Renault and the fact that they invest in Ampere shows the attractiveness that we're bringing to new types of investors. We've done some pretty detailed analysis in our shareholding today and looking at who potentially might want to do a trade-off between Renault and Ampere, et cetera. And candidly, based on the data that we have, we don't assess that, that's a high risk. There will be some of it, but we think the value that we will create by having a business that has all the right conditions around it to be successful more than outweighs that by a significant amount.

But aren't you worried that -- because we've had another split in the sector where the hope was that all the right investors that give that new company a better valuation that, that benefit of the better valuation in the NewCo kind of translates back to the existing shareholders. And your existing shareholders will be giving up X percent of that exciting new company but markets may not necessarily reflect that into the known share valuation.

Look, I think, again, it's a question of do you want to own 100% of something that's successful? Or do you want to own 80% of something that's incredibly successful? And we look at that math the same way you do, right? So it's a question of being comfortable that by putting all the chances behind Ampere, giving it the right capital, giving it the means to accelerate its product development, to accelerate its cost-out activities, et cetera, will make it incrementally more successful than if we had kept 100%. And that ultimately will return more cash to the group and more op profit, et cetera. If we were not convinced that, that is going to be the case, we wouldn't do it. That's really the trade-off. And I think we don't see a lot of out there that actually match what's going on with Ampere. If you look at the Porsche IPO, it's a different thing, right? You have a franchise with Porsche that's already incredibly successful, that's I'm sure, continue -- going to continue to grow, but off a very, very large base. Ampere realistically is still kind of a start-up. And so we're in a phase where really making it successful and putting all the chances on its side is going to make the difference. And -- and so it's kind of a different environment for us, and that's why we're doing it this way.

We now have a question from Jose Asumendi, JPMorgan.

3 quick ones, please. Can you comment please on product mix improvement into 2024, which vehicles are going to be driving the mix next year? Second, can you elaborate a little bit more why pricing is so strong again in the third quarter? And what is driving, again, the very strong pricing on revenues in second half of the year? And how much of that will be dedicated to offsetting currency headwinds? And then three, finally, as you monetize the stake in Nissan, what are the investments and priorities you have for deploying the cash you receive from monetizing the stake?

So first on product mix in '24. So as I mentioned and yes, product mix will be a key driver for our profitability improvement in '24, we'll have really several effects. One is the carryover of the launches that we're doing this year. So I mentioned Austral and the impact that Austral is having on our financials. We mentioned that we've sold over 60,000 Austral already this year, and it's a year of launch, right? And we're gradually rolling Austral to all the different geographies that we want to sell the car in. And it's a car that just has a very, very strong contribution margin, and we haven't seen the full effect, right? On top of Austral, we're going to have the sister cars. So the first sister car is Espace. And as I mentioned, Espace shares, 80% of its components with Austral. It's a car that costs us a little bit more to manufacture because it's a bigger car, but that provides significantly more value to the consumers because it has significant more space, et cetera. So the cost-price differential, incremental, to Austral is very favorable. So we'll get even more margin on Espace than we're getting on Austral now. And again, Espace is just at the launch right now, right? It's really fully live only in France and Spain at this stage. And so we still have a significant amount of work to do to keep boosting that product. We'll have the second sister car coming in the first quarter with Rafale. And it's the same recipe, right, 80% commonality with Austral. A more sort of qualitative car with a higher price point and a slightly higher cost point, but even better sort of contribution margins. Then we'll have the full impact of Clio. As I mentioned, we're selling Clio Phase II cheaper than Phase I, but it will come with better contribution margins, thanks to all the cost activities that we've rolled out. And then we'll have all the launches that are going to take place in '25. So we'll start having the sales of Scenic in Q1. We'll start Ampere. We'll start having the sales of Renault 5 towards September. In the Dacia range, we'll have the new Duster come on. In LCV, we'll have the new Master, both ICE and EV. We'll start having new product offensive that Fabrice and his team will talk about in -- on October 25 outside of Europe with Kardian coming out in the second quarter of '24. And all these products come with contribution margins that provide an improvement versus the prior generation. So that's -- for us, that's clearly the key driver. Your second question is on pricing. First, the portion of the 7.5% that comes from compensation of foreign exchange is roughly 40%. So the other 60% continues to be pricing improvement. And there's a carryover effect of pricing actions that we've taken earlier on in the year. And then just the attractivity of the range is enabling us to keep the pricing good. And we stayed very faithful to the channel mix recipe that we've developed over the last a couple of years. So Renault is still every second car in retail, for example, which is significantly higher than it had been in the past. And that's driving some of the pricing. So we see pricing as continuing to be quite a significant driver in Q4 and gradually becoming less of a driver into 2024. Still offsetting FX and still doing some actions here, but clearly, mix will take over. And then your last question was use of proceeds, so to speak, on the Nissan stake. And look, I think I can't really go into too much details. But for us, it's a question of allocating the capital to things that are going to provide a better return on investment compared to what we're getting or what we're expecting to get from Nissan. And you know the areas that we're investing in. So there is obviously continuing to build the EV value chain, continuing to build the software value chain, both from Ampere perspective, but also outside of Ampere on things that we can do to improve our operational efficiency with software and artificial intelligence and things like that for internal productivity purposes. We also want to develop the Alpine brand, as you're well aware, and we're on a journey to invest to make Alpine go from a one-car franchise to being a full range of attractive sports car business, and that will take some investment. And we'll continue to invest also in The Future Is NEUTRAL. So we've got lots of answers. And as the specifics come about, I'll give you more details, but that's as far as I can go at this stage.

We now have a written question from Henning Cosman, Barclays. So Thierry, please could you discuss the main revenue bridge items for 2024, not looking for guidance, but in the context of negative invoices, negative mix and big order book correction in Q3, clients are nervous. Please, could you confirm the improvements beyond 2023? And please, could you confirm the positive pricing in '24?

Okay. So Henning, on the first question on the revenue bridge in '24. As I mentioned, by the end of this year, I think we will have hit the target inventory levels that we set to ourselves. So the volume element in our bridge of next year should become a positive. Now as I've mentioned many times in the past, when we do the equations for new product launches, we try to be conservative from a volume standpoint. And typically, what we actually asked the teams to do is to make sure that the cars can fly even if they hit sort of 80% of what marketing guys are saying we can hit. The result of that is that we tend to build a forecast going forward with conservative volume assumptions. So what we're seeing for next year is sort of low to mid-single-digit volume growth in '24 versus '23 okay? And I think we remain prudent from that perspective. As I've mentioned, as we do the product launches, the mix element of revenue should get back to being a positive. Pricing will remain a positive, but largely to cover some of the foreign exchange pressure that we're seeing. We continue to see -- to forecast foreign exchange pressure coming next year. And that's -- those are really the key drivers. So a slight volume increase, a good mix improvement with the launches and pricing that continues to be positive, but in a lower fashion outside of just continuing to cover foreign exchange. And then on the profitability for '24, it's -- you're going to have to wait until we give the guidance with the publication of the full year results. But you know our motto, and our motto is we don't go back and we firmly intend to continue to have a strong improvement and an improvement in the profitability going into 2024.