Renault’s [Euronext:RNO] decision to hive off its EV unit via an IPO will raise important new capital, but the car manufacturer’s timing is far from ideal. Ampere was created to be Renault’s electric vehicle and software division, part of what it called Renaulution transformation for the French car maker.
Currently Renault is planning to float Ampere in Paris in the second half of this year. Renault says it plans to keep a majority of the shares to itself, so will not be giving up control. Ampere will effectively function as a manufacturer in its own right, with 10,000 staff, using a similar operational model to Polestar (a spin off brand from Volvo).
Renault says that it plans to have a line up of six electric passenger vehicles for sale by 2030, leveraging its ElectriCity production hub in northern France, and a network of suppliers within a 200 mile radius. Renault is also very wedded to what it calls ‘software-defined vehicle technology’ – i.e. more intelligent vehicles that can up constantly upgraded rather than thrown on the scrap heap, and which can learn from their users as well as staying connected to their maker.
Questions remain over IP separation
Nissan’s investment in Ampere alleviates some market concerns around IP separation. However, questions persist over the revenue-sharing agreement between Ampere and Nissan.
“Ampere is set to manufacture in Europe and it is seeking to localise its supply chain,” says Orwa Mohamad, an analyst with Third Bridge. “However, our experts say that although it can reduce some geo-political risks, the reality is that high-level EV components are difficult to source in Europe alone and battery supply chains are still dependent on China.”
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Our own coverage of the battery materials and manufacturing landscape in Europe alone suggests that plans to source nearly everything Ampere requires within a 200 mile radius look underinformed.
Ampere’s target to reach 10% profitability in 2030 also looks ambitious, given today’s macroeconomic climate, hard to predict EV demand, and elevating manufacturing costs. This injects a level of caution into the hype surrounding the projected IPO.
Benefits and challenges “in equal measure”
Unlike Tesla which started with a completely blank sheet of paper, Ampere inherits Renault’s legacy systems, processes, and people. “Our experts say this will bring benefits and challenges in equal measure for Ampere,” observes Mohamad. “In particular, Ampere will need to find new ways to work with the suppliers and attract engineers.”
Ampere looks like it will have minimum impact on the finances of the broader Renault group. Qualcomm is understood to be lined up as a potential investor in Ampere, as well as Nissan. Renault is also known to be in talks with Mitsubishi. And while all this is going on, Renault is also running its ‘Horse Project,’ a 50/50 JV with China’s Geely, which is looking after combustion and power train development.
Renault beat upgraded targets with its results today, 16 February. It has initiated a EUR 3bn cost cutting program and also written off EUR 2.3bn from its Moscow plant and its stake in Russian car maker Avotvaz. Pre-tax profits were up significantly, from EUR 549m to EUR 1.6bn.
