Renault's strategy to dominate the low-cost car market share

(Baonghean.vn) - 2015 was a successful year for the world's fourth largest car manufacturer, Renault SA, with the highest sales ever and profits reaching 2.96 billion euros, up nearly 50% compared to 2014. The strategy of expanding into new markets in Asia, Africa and catching up with the recovery of the European market seems to be putting the French car manufacturer on the right track.

Mr. Eric Champarnaud - Deputy Director of the French Office of Economic Information and Forecasting gave an interview analyzing and evaluating Renault's outstanding success in 2015.

PV: What do you think about Renault's impressive business results last year?

In 2015, Renault took full advantage of the European market, which is showing signs of gradual recovery. The growth rate of the European market compared to 2014 reached 9.3% and is likely to maintain this level this year.

Interestingly, the recovery of the European car market has occurred completely naturally, without the need for artificial stimulus. The reason is simply the aging of the vehicles consumers are using, leading to a natural “blood transfusion” phenomenon in the market. This phenomenon also compensates for the gap caused by instability in the Russian and Brazilian markets.

Renault had an impressive 2015 and demonstrated many competitive advantages in the low-cost car market. Photo: AFP

PV: Compared to other competitors, what smart steps has Renault taken to take advantage of that favorable common market?

Launching a good product at the right time. That is exactly what Renault has done with its latest products. For example, the Entry line with models such as Logan, Duster, Sandero, etc. is achieving significant success in the market by tapping into the consumer preference for smaller, more economical cars.

This consumer mentality is not new, but almost no one thinks that such a low-cost business strategy can bring significant profit. Reality has proven the opposite: Renault succeeded with low-cost cars because they launched this strategy at the right time when the market was just "starting" to restart.

PV: But to make a profit from cheap cars means sales must be extremely high...

It was a challenge that Renault accepted and they succeeded. Low-cost always comes with lower product profits. However, the profits from Renault's low-cost products basically cover the production costs. That is because they know how to collect and utilize machine parts and components of old-generation cars; optimize operating processes; promote minimalism in design;...

There were concerns that this strategy would “destroy” Renault’s brand. But that didn’t happen. On the contrary, Renault is building an extremely solid position in the mid-range segment of the car market.

PV: What about foreign markets?

We haven’t talked much about Africa yet, but Renault has a pretty good foothold there. The manufacturer has a branch in Morocco and currently accounts for 38% of the local market. This region will rise on the economic map in the not too distant future, by which time Renault will have already “planted” strong “chess pieces” there.

Renault CEO Carlos Ghosn and a low-cost car aimed at the Indian market. Photo: AFP

In India, Renault’s Kwid has also performed quite impressively (100,000 orders since its launch in September 2015). The manufacturer has carefully researched the market it is targeting. Indians want a cheap but good quality car and the product that Renault brings to this large market is a car priced at only 3,500 euros, minimalist but extremely good value for money.

Admittedly, it's a bit of a hassle to have a car without navigation or automatic windows, but even without them, it's still a car that meets all the requirements of a means of transportation. Best of all, the risk of breakdown is extremely low. That's Renault's strategy.

PV: And now, let's talk about China. Renault has just set up a factory in Wuhan, the most populous country on the planet, to produce the Kadjar model...

Renault's presence in China may be late compared to its competitors, but its development conditions are quite good. French brands are currently being positively received in the Chinese market.

Renault's Kadjar model assembly line at its factory in Wuhan, China. Photo: AFP

Furthermore, the survey shows that the Chinese auto market is about to enter a period of “blood change” and consumers will buy cars en masse. However, this is a class of consumers with experience and practical needs rather than showing off. Instead of sedans, they will tend to look for other car lines such as SUVs - a market segment where Renault has an advantage.

Another prospect for Renault in China is the electric car segment. Traffic congestion and pollution are two major problems in China. Car registration is limited to seven cities. However, electric vehicles “escape” the strict control of cars running on traditional fuels.

Although the necessary transport infrastructure to accommodate electric vehicles (charging stations) is not yet in place, the idea seems to be gradually "ripening" in the minds of Chinese strategic planners. By then, Renault, which is famous for its electric power, will have a dominant position in the new generation car market in China.

Thuc Anh

(According to Liberation)