Renault interview: Carlos Tavares

While French carmaker Renault is currently fighting falling sales in Europe, its Middle East operations are bucking the global trend. In a bid to become the region’s top European carmaker, its masterplan also includes the revival of a popular favourite from the past
Carlos Tavares, chief operating officer at Renault, says the carmaker aims to become the number one European brand in the GCC
By Shane McGinley
Sun 03 Feb 2013 09:48 AM

When the international petrol crisis struck Europe in the early 1970s, one of the sectors hardest hit was the specialist car manufacturing market. Car models that had been born out of World War II and had taken off in the heady days of the 1960s were now facing a crisis of confidence.

Having won racing tournaments and fans across Europe, one such example was the Alpine sports car in France. With sales down by nearly a third as a result of the rising fuel crisis, the beloved brand was eventually bailed out by French mega manufacturer Renault. Attempts to revive the popular model proved futile and Renault eventually shut the brand down in 1995, 40 years after it was founded by Jean Rédélé.

Fast forward to the new millennium and Renault is now facing some even bigger challenges of its own. Fuel prices are constantly threatening to rise even further, its global sales are down 6.3 percent — with Europe slumping 18 percent — and its major shareholder, the French government, is putting pressure on Renault to protect local jobs by raising production.

In the midst of these growing troubles, the Middle East is a beacon of good news for the French manufacturer. In addition, the Alpine is now firmly back on its agenda and part of the firm’s masterplan is to become the biggest European carmaker in the region.

“Alpine is a very nice opportunity,” a smiling Carlos Tavares, chief operating officer at Renault, says as he sits down for a chat in Dubai. “If everything goes well, probably by late 2015 or early 2016 [it will be on the road in the Middle East],” he confirms.

“We had this sports brand in our company and when I came back from Nissan eighteen months ago that was a big opportunity for us to create, or recreate, and give rebirth to the sports car brand Alpine.”

There is still a large network of Alpine enthusiasts clubs across France and in the UK, the US, Australia and Japan. Last year, Renault formally announced that plans had moved into the fast lane and it had signed a partnership with old-school British manufacturer Caterham Cars to bring Alpine back to the market.

“We have created a specific 50:50 joint venture to develop both the Alpine cars and Caterham cars and share a number of investments in terms of technology, platforms, etc, which will make the sustainability of this brand much stronger than it was before.

“Because I am spending so much time with them on the design studio I can tell you the car is outstanding and we want to give our engineers an appropriate lead time to do an outstanding job. The car is coming up quite nicely,” he says.

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With the Middle East’s love of luxurious sports cars, the region is likely to welcome the new brand enthusiastically, especially when the figures show the region is already one of Renault’s best-performing regions.

In 2012, sales in the Middle East grew by 10 percent to reach 116,952 units for a total market share in the region of 4.4 percent, up from 3.5 percent in 2011.

Arabian Automobiles, the exclusive dealer for Renault in Dubai and the northern emirates, reported even more mouthwatering results earlier this year when it announced its 2012 Renault sales grew 67 percent year-on-year.

“With the onset of 2012, the business saw a double-digit growth in sales thanks to growing confidence in customers’ purchase behaviour and further interest in the Renault line-up,” says Ashish Goel, deputy general manager at Arabian Automobiles Renault. “The arrival of the Renault Duster gained a lot of interest among UAE residents and played a huge role in increasing traffic to our showrooms.”

“In the last four years, we have increased our volume fivefold and we are now the fourth European brand in the market. We intend not to stay here and we intend to progress and ultimately become the number-one European brand in the GCC,” Tavares says.

“Here in the region in the Middle East we already have high-end products with the Safranes and the Clios. With those products, we think they are very much suited for this market and are sourced from our operations in Korea. We have a very good balance in what we call the entry range and the upper range.”

With strong growth in the region, Tavares says production is moving forward at its facilities in North Africa. “In Algeria, the deal is more. The size of the facility, eventually we are looking at a 75,000-unit-per-year capacity… The major purpose of this investment is to support local domestic growth, which is very, very high. It makes total sense to support the total growth in Algeria,” Tavares says.

The latest figures speak for themselves as Algeria posted record Renault sales of 113,664 units — a rise of 51.5 percent — and topped the 100,000 mark for the first time. In a fast-growing market, the Renault Group increased its market share by 0.8 points to 26 percent and is now the number-one brand.

In Morocco, the Dacia and Renault brands topped the sales rankings last year, rising to a new national sales record of 47,709 units and a market share of 36.6 percent. As a result, Renault’s $1.3bn production facility is moving forward successfully.

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“In Morocco, the Tangiers plan is working very smoothly, we are now on a two-shift operation in the first part of the plant… It will continue to grow. It is supplying many, many products related to the entry range, which has been a huge success everywhere,” Tavares adds.

Overshadowing our chat, French government troops entered northern Mali and expatriate workers were caught up in the hijacking and subsequent siege on an oil petroleum facility in Algeria in early 2013. With the French government owning 15 percent of the company, Tavares says he has no fears about Renault’s operations in the region or its future growth prospects.

“Of course we expect all this is going to get fixed, but no… the operations are moving on very smoothly,” he says categorically. When it comes to the Gulf region, Tavares says it is unlikely a production facility will be set up in the region — in the same way that Jaguar Land Rover has just announced a new plant in Saudi Arabia — until the volume of sales reaches a satisfactory level.

“I said a fivefold increase in four years, but still if you look at the total volume it is still a limited volume. So we would have to grow much more before we start thinking about local sourcing.

“First we want to be the number-one European brand in this region and once we achieve this we will look at the next step of sustainable growth. We are here to stay. We are here for the long term.”

As part of this growth push, Renault announced in January that from 1 February the company will combine management operations across the Middle East, with a regional office based in Dubai.

The twelve countries coming under the Renault Middle East umbrella include Afghanistan, Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria and the UAE.

“The creation of Renault Middle East is designed to meet our growth objectives in the overall Asia-Pacific region which represents 50 percent of the worldwide automobile market,” says Gilles Normand, chairman of the Asia-Pacific region of Renault.

While Renault executives exchange platitudes about the Middle East and Asia, bigger issues are still causing them headaches back in their home market. As the carmaker pledged a return to positive growth in 2013, it is still resisting government pressure to build cars in the country for alliance partner Nissan.

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Struggling with surplus capacity because of weak demand in Europe, Renault has just unveiled plans to cut 7,500 French jobs over four years. The French government, Renault’s biggest shareholder, wants the carmaker to support domestic employment by building cars for Nissan, the Japanese carmaker in which the Paris government also owns a 43.4 percent stake.

In a radio interview, Industry Minister Arnaud Montebourg said Renault chief executive Carlos Ghosn had agreed to the move, while a Renault spokesperson later told Reuters no such decision had been taken.

As the possibility of Nissan and Daimler production at Renault plants looms, the company is looking for unions to agree to concessions, including a longer working hours.

“This is part of the discussions we are having with our unions,” Tavares says when pushed on the issue. “We are a French company and it is very important we have a high level of competitiveness in our country. Therefore, we have started some specific negotiations with our unions to make sure we agree on a road map to improve the competitiveness.

“Within the negotiations process it is going to be a bit of give and take. We want to make sure, on the corporate side, that we ensure a certain level of activity. If the agreement leads to higher competitiveness then you can be a candidate for assembly in France of other cars and the cars of our partners and [this] would be a positive outcome,” he adds.

However, the Japanese carmaker is inclined to build the car at a more competitive Spanish facility, a Renault-Nissan source told Reuters.

Pushed further on how the new regime has changed since François Hollande took over power in May 2012, Tavares was equally pragmatic. “The French state is a 15 percent shareholder so it is our reference shareholder and we are very comfortable having a very open and transparent dialogue with the French government, which we have.

“For us, it is going very smoothly and we have seen that in the statement made by the top ministers from the French government which fully translates this good relationship, which is helpful and is very normal, given the fact it is our reference shareholder.”

As Tavares moves onto another reception, audience or interview in the Gulf I am sure he feels much more at home with the growth figures and statistics coming out of the region, certainly when compared to the prickly issues awaiting him back home in France.

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