Renault Group on course for strong 2017 as global sales grow 4.8% y/y during November
Renault Group has released data showing a 4.8% year-on-year (y/y) increase in November, putting it on course for a strong 2017 performance.
IHS Markit perspective
- Implications: Gains have come predominantly from its European and Eurasian markets, while its performance has dipped elsewhere.
- Outlook: IHS Markit anticipates that for 2017, Renault Group will record an increase of around 8.5% y/y. However, while we do not envisage the company hitting its 5 million unit-per-annum (upa) sales target for 2022, we do anticipate a positive performance in to the next decade and beyond.
The Renault Group has released data showing that its global light-vehicle sales have increased by 4.8% year on year (y/y) in November. During the month, the total number of passenger cars and light commercial vehicles (LCV) sold grew from 317,207 units to 332,403 units. Of this, passenger cars rose 5.2% y/y to 290,080 units, while LCV sales increased by 2.3% y/y to 42,323 units.
Three out of its four brands have recorded gains this month. The mainstay Renault brand has increased by 2.3% y/y to 235,879 units, as new models remained especially important to maintaining this momentum. This included the Scenic (incorporated under Mégane), second-generation Koleos and Captur GA developed for non-mature markets. The brand has also been helped further by its exposure to emerging markets through its Logan and Sandero models. Its low-cost Dacia had an even better month with sales up by 20.7% y/y at 56,664 units, as the Sandero and Dokker both recorded improvements, while the soon-to-be-replaced Duster also managed to make a gain. The Lada brand - which has been included in the Renault Group's global sales since the start of the year by virtue of its majority stake in AvtoVAZ - rose 16.6% y/y to 31,558 units. This gain has been through a combination of its new and updated models like the Vesta, alongside the existing Largus and 4x4. However, sales of the South Korean Samsung brand have struggled yet again, this time slumping by 33.9% y/y to 8,302 units as the Talisman-based SM6 has been unable to maintain the sales levels since its introduction with a fall of more than 50%, while the replacement for the QM5, the QM6, has also dropped off versus a year ago.
Renault Group's performances on a regional basis have been very mixed in November as some markets have softened. However, Europe has not been one of these as its sales increased by 8.8% y/y to 164,982 units. While its domestic market France put in a robust performance with a gain of 5.5% y/y as it took more than one-third of the market, greater gains were recorded in Germany, Italy, Spain, Netherlands, Switzerland, Sweden and Poland. These were easy enough to counter those countries where it suffered a decline such as the United Kingdom where it retreated by 31.1% y/y.
Also helping with its positive growth this month has been its Eurasia market, where its sales increased by 13.2% y/y to 71,717 units. Russia offered much of the support for this improvement with 14.5% y/y gain from this market which made up almost 60% of its sales here. It was also helped by demand in Romania where it increased 19.3% y/y, although there was only a small increase in Turkey.
It was a relatively flat month in the Africa, Middle East and India region. Here, sales were down 0.8% y/y to 48,176 units. It has not been helped by a 24.7% y/y decline in India due in part to the Kwid being well established here now, or a retreat in Morocco and Saudi Arabia, the latter coming on the back of a string of gains earlier in 2017. However, Iran offered up a gain of 30.6% y/y as this market continues to bear fruit on its return. It was also helped by Algeria where sales are up 30.8% y/y.
Declines were far steeper in the Americas and Asia Pacific region. In the former, sales have retreated by 7.9% y/y to 31,185 units dragged down by similar gains in Brazil and Argentina, compounded by a steep 22.2% fall in demand in Colombia. As for Asia Pacific, Renault Group's sales have dropped 17.2% y/y to 16,343 unit. Despite a 15.4% y/y gain in China where it now produces two locally built models, the South Korean market - home to its Samsung brand - where it fell by 33.9% y/y last month, has been the biggest influencer.
Outlook and implications
While the gains this month are not as large as some of those from earlier in the year, the company is certainly on course for another strong improvement in sales volumes. Over the first 11 months, its sales currently stand at 9.9% y/y to 3,396,059 units, of which 48.8% of this total came from markets outside Europe. In volume terms, this amounted to an increase of 13.3% y/y. IHS Markit anticipates that for 2017, Renault Group will record an increase of around 8.5% y/y, according to our methodology. This would be the second year in succession of that the company has seen gains of this scale, after a 10.8% y/y increase in 2016.
These gains have are thanks to its previous six-year plan, which has laid the foundations on which the targets of its new "Drive the Future" strategy have been built. By 2022, the company expects to sell 5 million units per annum (upa), which will be underpinned by doubling its sales outside Europe to around 3 million units during this timeframe. The scale of some of these growth targets is particularly aggressive in some markets, notably in Eurasia where is aiming to sell 1.1 million upa, of which 750,000 upa will come from Russia, while in China it expects 550,000 upa. Nevertheless, it has already made moves to kick its sales up a gear and meet the targets in China, with the establishment of a LCV joint venture (JV) with Brilliance China Automotive Holdings.
Although we currently have some doubts that Renault will grow to become a 5-million-upa automaker in the early part of the next decade, we do envisage the company continuing its positive trajectory. IHS Markit expects that its global sales will grow around 5.0% y/y in 2018 before breaking tipping over the 4-million-upa mark during 2019. This would be stark contrast to the 2.35 million unit annual sales from over a decade before. We also see sales hitting 4.52 million units during 2022 and growing to 4.66 million units in 2023.
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