Renault’s green IPO hitch is blessing in disguise

Eyes on ro. Renault CEO Luca de Meo has just cancelled a public float he doesn’t need in a market environment he doesn’t like. French carmaker’s boss h hoped to clinch a valuation of up to 10 billion euros for Ampere, its recently spun-off electric-vehicle division. That’s equivalent to Renault’s current market capitalisation. De Meo backtracked on listing plan on Monday, blaming market volatility and “childish” investors’ doubts on EV market’s long-term prospects. Ampere’s initial public offering (IPO) setback is in reality a blessing in disguise.

Under de Meo, who took over in July 2020 and is pushing through an aggressive turnaround plan, Renault has exceeded its cash-generation target in each of past two years. group is sitting on some 4 billion euros of net liquidity, according to Jefferies. That’s more than enough to finance Ampere’s development until 2025, when it is expected to break even.

Europe’s green car industry faces increased competition from cheaper Chinese vehicles, while European governments are wobbling on subsidies needed to encourage price-conscious consumers to go green. De Meo, however, remains confident that regulatory constraints European Union has imposed on fuel-powered cars, including CO2 targets set at 50 grams per kilometre per car from 2030, will support strong growth of electric cars.

In such a challenging market, an IPO would have been a distraction. De Meo’s goals are ambitious both for Ampere’s top line and its cost base. He plans to increase revenue by 30% a year until 2031, well above a forecast 18% annual growth for sector globally, and shrink cost of making an electric vehicle by 40% in next five years. Ampere will need a focused management to meet such tough targets.

Moreover, a listing would have furr complicated Renault’s holding company structure. De Meo has alrey split group along five different businesses including Ampere. And Renault still sits on a 40% stake in $16 billion automaker Nissan Motor that it plans to partially offlo.

Japanese partners Nissan and Mitsubishi, who h planned to invest a total 800 million euros in Ampere, will have to decide wher y still want to proceed now that stock market listing is no longer on agenda. But y remain interested in an industrial cooperation for Renault on electric cars, so y would have reasons to go ahe noneless. De Meo also harbors plans to strike a deal with larger German rival Volkswagen to create a joint platform for mid-size urban vehicles that would help drive down costs furr.

IPO plan may be revived in future, if and when Ampere shows it can deliver on its targets. For now de Meo has his priorities in right order by focusing on Ampere’s potential customers, rar than its potential investors.