Can Renault Win This Bet?

March 26th, 2013
in Op Ed, syndication

Written by

The moment of truth is arriving for Renault (RNO.PA), Europe's second largest car maker, which has staked a €4bn investment on the production of its first all-electric vehicle designed for the mass market.

The Zoe, a four seater hatchback compact, has been on sale since last October, but without any publicity, since when its has sold about 2000. It is now flooding into dealers' showrooms across France and the first real test of its popularity will begin.

It is by no means certain that it will prove a commercial success, as Renault's president, Carlos Ghosn, concedes, even though it will be sold in France with a €7,000 subsidy for each car (which raises the question as to what one means by "commercial" success).

Follow up:

The price pre-subsidy will start at €20,700 (about $26,920), which, given the limitations of the car, is not cheap, but the consumer will pay €13,700. In addition there will be a €79 a month charge for lease of the lithium-ion battery, and a one-off cost of between €800 and €1,500 for a plug-in recharge garage unit.

The car is designed for urban use with a range of between battery recharging (takes six to nine hours) of about 150km in temperate weather and 100km in cold weather and about 210km on the open road.

The state is part-owner of Renault and the public sector will be a major customer for the Zoe. A public procurement agency, UGAP, signed a contract for delivery of the first 2,000 vehicles in February and expects to buy 17,000 over the next three years.

The factory at Flin, just west of Paris, will have a capacity to produce 150,000 cars a year. The battery will be produced in France as well, making the car a product entirely made in France.

It will be marketed across Europe (but not in North America), where one might expect it to struggle unless it gets a subsidy roughly equivalent to that provided in France.

Renault is not saying what its sales target for the Zoe is, but if it could sell all the 150,000 cars that the Flin facility can produce in France itself, it would be about 7 % of all cars sold in a normal year (total new reistrations in 2012 , an exceptionally slow year, were about 1.8m).

Renault also has an eye on the Chinese market, where the government aims to build up sales of electric cars to five million by 2020, each car selling with a government subsidy ot €7,500.

Sales in France are likely to climb slowly owing to the paucity of recharge plug-in points. The development of this infrastructure appears to be well behind the development of the vehicle itself.

To date the European market for electric cars is tiny, with 24,853 vehicles sold in 2012, about 0.2 % of the market, of which 9,314 in France, which has several niche manufacturers of electric cars, including one, the Bollore, which is being used with some success in a car sharing scheme in Paris comprising 1,750 cars.

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