Renault has lambasted Tesla for cutting electric-vehicle prices, warning that the US group would “kill” second-hand values of cars and send itself into a “spiral”.
The comments by the French carmaker’s finance boss Thierry Piéton came hours after Elon Musk vowed to keep reducing prices in order to drive sales higher.
Renault shares slumped as much as 7 per cent despite it posting higher first-quarter revenues on Thursday, with analysts citing worries about pricing pressures across the industry, and despite the French carmaker’s insistence that it would not slash its own price tags.
Renault said its main aim was to keep customer monthly lease payments as low as possible, something that required it to protect the “residual value” of a car.
Most new cars are bought on finance deals that see motorists finance the depreciation of a car over a lease period, rather than its overall value.
The more value a car is expected to lose over the three years, the higher monthly payments typically are. About 80 per cent of the French carmaker’s EVs are sold on finance.
“When you cut prices significantly, residual value takes a hit,” Piéton said.
“There is no big incentive to go cut the prices and kill the residuals and go into a spiral that some of the competition has done,” he said. “If it results short term in slightly lower volume, so be it.”
Piéton’s comments are a direct aim at Tesla, which has cut prices by up to a fifth since the start of the year, leading to fears of a price war across the industry.
Renault’s share tumble came in spite of its recent turnround efforts after steep losses during the coronavirus pandemic.
Philippe Houchois, an analyst at Jefferies, said the French carmaker was often seen as a “weak link” in the industry, with lower margins than many of its peers. “The market is worried about pricing coming off after Tesla,” Houchois said.
On Thursday, Renault posted a 30 per cent rise in first-quarter revenues from a year earlier to €11.5bn, slightly above analyst expectations, and maintained its target to improve operating margins to at least 6 per cent in 2023, from 5.6 per cent last year.
Despite the French carmaker’s comments, some analysts said the group may still have to reconsider its prices to remain competitive, and find savings elsewhere to keep margins growing.
“Renault may be forced to lower its prices and find new efficiencies via its new manufacturing plants in northern France,” Third Bridge analyst Orwa Mohamad said.
Renault’s comments came hours after Elon Musk on Wednesday evening indicated that Tesla would keep lowering prices to pursue its target of increasing market share.
The electric-car maker has an unofficial target of selling 20mn vehicles a year by 2030, which would make it larger than industry leaders Toyota and Volkswagen combined.
“This is a good time to increase our lead further, and we’ll continue to invest in growth as fast as possible,” Musk told investors.
Tesla has seen the residual value of its vehicles fall significantly since it started cutting prices earlier this year, the Financial Times reported last month, potentially making its cars more expensive to lease.
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