No spin-off for 'golden nugget' Dacia despite star profit role

Renault’s announcement on Tuesday that it would split its businesses to better prepare for an electric, low-carbon future included news that it would float its Ampere EV division and hints that another entity – the emergent premium brand Alpine – could also be spun into a future stock-market listing. But also coming out of the Renault Capital Markets’ Day was the fact that one of its most profitable brands was Dacia, which will remain firmly inside Renault’s new Power division for ICE vehicles, with no plan to even give the brand its own P&L (profit and loss) balance sheet. Dacia is the brand that uses Renault’s thoroughly tried and tested (and amortised) platforms and engines to provide a budget alternative to buyers who don’t mind being a little bit out of date in return for a new vehicle at a decent price. Renault doesn’t separate out Dacia’s profit from the Renault Group as a whole, but Group CEO Luca de Meo was more than happy to provide a bit of colour on Dacia for the assembled investors and analysts on Tuesday. “Dacia is one of the group’s golden nuggets,” de Meo said. The Romanian brand, he said, posted “double-digit” profitability and set a target of 15% profitability for 2030. Some probing from analysts revealed from group chief financial officer Thierry Piéton that Dacia contributes about 20% of Renault’s automotive revenues. Put another way, Dacia’s margins and percentage share of revenue are to the Renault Group what Audi’s are to the Volkswagen Group. That's remarkable for a budget brand, rather than a premium one, making it an enviable asset – especially as the core Renault brand has only recently moved back into profit (no margin figures were given). This asset is one that Renault plans to sweat with a move to bigger C-segment (compact) vehicles and a planned doubling of sales from below one million now to two million by 2030, all using the same CMF-B platform. Not all will be badged Dacia, as Renault uses its own badge on some of the budget models in emerging markets, but all will use the same formula that increasingly will be seen on larger vehicles like the forthcoming Bigster SUV (pictured below) and two more planned C-segment vehicles. “This is the Dacia magic potion,” de Meo said. “Dacia will remain Dacia but only gets bigger.” The company aims for 40% of all Dacia sales to be in this larger segment by 2030. “B-segment cost, C-segment revenue. This is the recipe for 15% [margins],” Piéton said. Dacia’s current performance was highlighted. “It’s one of the only brands growing in a very depressed market,” Piéton noted. Dacia sales in the UK, for example, were up 58% in the first 10 months of the year to 23,053, boosted by the launch of the new Jogger MPV and the continued popularity of the low-budget Sandero supermini. One big reason why mainstream brands have been hit hard by the ongoing supply crunch curtailing production is that big groups have prioritised higher-profit premium cars for the scarce semiconductors. But as we've seen, Dacia is the higher-profit brand within the Renault Group, hence it gets the chips. “If I have to give more chips to Dacia because it makes more money, then I give more chips to Dacia, which is actually what we do today,” said de Meo. The reasons for Dacia’s profitability were spelled out, beyond the common platform and reused tech. For example, the brand offers fewer than 300 combinations per car: that reduction in complexity helps when building the cars, but also when they come to be sold, lowering the distribution costs. De Meo called Dacia’s no-haggle distribution model “agency-like”, which means it’s not agency but fixes the margins for the dealer and keeps prices transparent. That transparency has one disadvantage in that you see price rises much more visibly instead of just removing the discount, but the benefits far outweigh that. “The Dacia distribution model is half the cost of other global OEMs,” de Meo boasted. Dacia sales are also 85% to private customers, which tend to spend more than fleets or leasing companies per car. That’s compared with 70% when Renault and Dacia are combined. Renault’s sleight of hand with Dacia is to now increase turnover per car by 50%, by pushing up a segment size with cars such as the Bigster but without losing that price and margin advantage. The cost of cars is inevitably going to rise as the brand has to absorb new regulation and pushes into hybridisation. Renault hopes the cost to electrify Dacia’s drivetrains will be driven down by sourcing them from Horse, the new Renault joint venture with Geely that will supply combustion engines at price. Renault says these will be cheaper than it can currently build them for, thanks to the greater economies of scale. But what’s not going to happen is that we will get to stare under the bonnet of Dacia’s finances. They will stay hidden, continuing to make the Renault Group brand look good – or so the company hopes.