Renault may split EV business, find partner for legacy assets

By BLOOMBERG | 5 April 2022

PARIS: Renault SA is exploring a possible breakup and initial public offering of its electric vehicle assets, according to analysts, a move that would transform the French automaker laid low by its ties to Russia.

The possibility of a transformational change was outlined in broad terms by the manufacturer in February.

During a meeting last week with analysts, top managers including chief executive officer Luca de Meo and chief financial officer Thierry Pieton provided more details, including timing and the potential involvement of a partner.

"The management team continues to conduct exploratory works in view to split the company into possibly two entities,” Stifel analysts including Pierre Quemener wrote in a note.

A so-called New Mobility company made up of electric vehicles and assets from its Mobilize car-sharing unit would be separated from the legacy assets, they said.

"The CEO added that the latter could be combined with the ones of a potential partner,” the note said. "An IPO of New Mobility assets could be contemplated for 2023.”

A Renault spokesman declined to comment.

The possibility of a deep overhaul of Renault is emerging just as the company faces a crisis surrounding its longstanding business in Russia.

Renault last month signalled a retreat from its second-largest market by halting operations at its Moscow plant and saying it’s assessing available options for its AvtoVaz venture that makes the country’s top selling Lada brand.

A move to split the company would serve not only to deflect from a costly pullout from Russia, but also to raise funds for development of EVs and technology.

Renault cut its forecasts for group operating margin and automotive operating free cash flow, citing the suspension of its business in Russia.

Weighing revamp

Less than a week before Russia invaded Ukraine that triggered wide-ranging sanctions and an exodus of foreign companies, Renault said it was considering a reorganisation during an earnings presentation.

The company "is studying the opportunity to bring together its 100% electric activities and technologies within a dedicated entity in France to accelerate their growth,” it said in a Feb 18 statement.

"At the same time, Renault Group is also studying the opportunity to bring together its activities and technologies of ICE and hybrid engines and transmissions based outside of France within a dedicated entity.”

Any IPO of the EV and Mobilize assets could be led by Clotilde Delbos, deputy CEO who relinquished her role in February as chief financial officer to head Mobilize.

"All options to separate the ICE from the BEV business are on the table,” Exane BNP Paribas analysts wrote in a note, saying this could include an IPO of the EV assets or off-loading of the combustion-engine operations into a joint venture.

JPMorgan analyst Jose Asumendi also wrote about the possible split including "looking at Renault as a standalone EV entity carve out of the current group under the format of an IPO.”

Renault isn’t the only automaker to consider this type of move as a way to transition to electric vehicles with Ford Motor Co. separating its EV operations from its legacy combustion-engine business.

The new Ford Model e unit will scale up EV offerings and develop software and connected-vehicle technology and services, while Ford Blue will focus on combustion vehicles, cutting costs and simplifying operations. Ford had considered a spinoff.