Chip crunch to hit Renault 2021 production harder than forecast

Renault's production losses in 2021 due to a global semiconductor shortage will be far larger than previously forecast, the French carmaker said on Friday, though it maintained its profit outlook help

During a presentation to analysts, Renault Chief Financial Officer Clotlide Delbos said the carmaker's visibility on the chip shortage in the fourth quarter was "still very poor because the information coming from suppliers is very unreliable." Delbos said the chip shortage should ease a little by the end of the year with the end of a COVID-19 lockdown in Malaysia, but said supplies will remain constrained throughout much of 2022.

When asked about other raw materials, she said Renault was not seeing shortages but was facing price increases.

The shortage of chips, used in everything from brake sensors to power steering to entertainment systems, has led automakers around the world to cut or suspend production, pushing up vehicle prices.

Like its peers, Renault has focused production on more profitable models.

The French carmaker said its production losses for the year would now be close to 500,000 vehicles, or more than double the 220,000 units forecast in early September.

Sources close to the firm told Reuters this week production losses would be much higher than previously forecast.

The carmaker said its order book hit a 15-year high by the end of September for the equivalent of 2.8 months worth of sales.

CFO Delbos said the wait time for the Dacia Sandero, a popular, low-cost city car, was now six months.

During the third quarter, fully electric, plug-in hybrid and hybrid models made up more than 31% of sales, Renault said.

The carmaker is on track to meet more stringent 2021 European CO2 emission targets, it added.

Renault said third-quarter revenue had fallen by 13.4% to 8.98 billion euros ($10.4 billion) from 10.37 billion a year earlier, as higher car prices helped offset some of the 22.3% drop in global sales.

The company reiterated that its full-year operating margin would be around the same as the 2.8% it reported for the first half of the year. That compared to a loss margin of minus 0.8%.

CFO Delbos said the company would complete a 2 billion euro cost cutting plan in coming weeks, more than a year ahead of schedule and aimed to speed up further cost cutting plans.

The carmaker said it would achieve positive free cash flow for its automotive business for 2021, excluding changes in working capital requirements. That cash flow target will be boosted by a 930 million euro dividend from its financing arm RCI Banque, Delbos said.

Renault said vehicle inventories had fallen to 340,000 cars at the end of the quarter from 470,000 a year earlier.

($1=0.8601 euros)