Renault Drops Listing Plans for Electric Vehicle in Response to Market Trends

Dew Briefs:

• Renault abandoned plans
• Slowing demand and a lack of investor
• The global volume of listings decreased by 8% compared to 2022

Renault reaffirmed on Monday that these companies expressed their interest in investing in Ampere, regardless of whether the company proceeds with an IPO. Additionally, chip maker Qualcomm was also expected to invest in Ampere, but its investment was contingent upon the IPO taking place.

• The global volume of listings decreased by 8% compared to 2022, resulting in the lowest annual figure of $123bn in the past five years.
• EY reported that sentiment seemed to improve towards the end of 2023, but Renault’s decision added a fresh note of gloom to the overall market.
• Previously, Mr de Meo had estimated Ampere’s value to be up to €10bn (£8.5bn), and the listing was viewed as a strategic move to separate Renault’s legacy car business from the faster-growing EV division.
• The company attributed the decline in sales not to lackluster demand but to cooled sales and slower rollouts by car manufacturers.
• Tesla recently cautioned about a sales slowdown this year, citing higher borrowing rates as a deterrent to car finance deals and indicating that investors should anticipate notably lower growth.
• Data from the Society of Motor Manufacturers and Traders (SMMT) revealed a reversal in the UK market share of EVs last year.

Renault’s CFO Thierry Pieton stated during a conference call with journalists, “We will need to engage in discussions with them to determine if they would like to participate in an alternative manner or if we maintain the current arrangement.” In November, Reuters reported that Renault’s plans to list Ampere were being complicated by weaker electric vehicle demand, increased competition from China, and market volatility.

• Some car manufacturers, including Tesla, have implemented price reductions to stimulate demand.
• Government subsidies in countries like the US are also reducing costs for consumers.
• The Society of Motor Manufacturers and Traders (SMMT) is urging Chancellor Jeremy Hunt to boost demand by reducing VAT on electric car purchases for three years in the upcoming Budget on March 6.
• Manufacturers are being compelled to increase the proportion of pure electric vehicles (EVs) they sell due to the zero-emission vehicle (ZEV) mandate.
• Failure to meet the ZEV targets will result in fines for car makers, with the targets taking effect from this year.
• The target for 2024 is 22%, which will rise to 28% in 2025, 52% in 2028, and 80% by 2030.

The potential listing of Ampere would have provided a positive outlook for the stock market following a challenging 2023 due to rising interest rates. Although the IPO market experienced its lowest levels of activity since 2016 last year, bankers had hoped for a potential resurgence if borrowing rates began to decline.

Diver Insight:

• Renault has abandoned its plans to list its electric vehicle business on the stock market.
• The decision to cancel the proposed float of the EV unit, Ampere, was announced on Monday.
• The company did not provide any revised timings for when the deal could potentially be reintroduced.
• Renault attributed the cancellation to “current equity market conditions.”
• The company also highlighted its ability to generate cash, which has exceeded expectations.
• Luca de Meo, Renault’s CEO, previously emphasized the importance of Ampere’s success for the wider group’s turnaround.
• However, he now states that the decision to cancel the listing was a pragmatic one.
• Slowing demand and a lack of investor appetite were cited as reasons for the cancellation.
• European and UK sales of electric vehicles declined last year due to high prices and inadequate charging networks.
• The market for initial public offerings experienced a significant decline in the previous year.