Renault Reports €11.7 Billion Q1 Revenue as Vehicle Sales Rise

French automaker Renault boosts global vehicle sales while navigating strategic shift toward higher-margin segments and EV expansion

Key Takeaways

• Jefferies maintains Hold rating with €48 price target on Renault shares despite 18% upside potential, citing transition from cyclical recovery to more complex re-rating story amid CEO departure
• Q1 2025 revenue reaches €11.7 billion with 564,980 vehicles sold, up 2.9% year-on-year, while company raises dividend 19% to €2.20 per share reflecting improved cash position
• Nissan stake reclassification triggers €9.5 billion charge as Renault’s cross-holding valued at €9.3 per share faces potential sell-off risk that could negatively impact valuation

Introduction

Renault’s investment narrative has fundamentally shifted from a cyclical turnaround story to a more challenging re-rating proposition, according to Jefferies analysts. The French automaker delivered solid first-half results that exceeded market expectations, yet questions persist about its ability to sustain momentum amid executive transitions and strategic uncertainties.

The company’s commercial strategy prioritizes value creation, with retail channel mix reaching 58.5% of sales—significantly above the 41.7% market average. This approach, combined with a focus on higher-margin C-segment and above vehicles at 40.6% of sales, positions Renault to maintain residual values above direct competitors.

Key Developments

Renault’s updated guidance reflects improved second-half margin expectations, prompting Jefferies to adjust its full-year EBIT margin forecast to 7.1%. The investment bank projects first and second-half estimates at 6.9% and 7.3% respectively, confirming Renault’s operating margin target of 7% or higher for 2025.

The company’s Q1 2025 performance demonstrates operational strength, with group revenue reaching €11.7 billion and vehicle sales totaling 564,980 units. International markets drove notable growth, particularly in Latin America with 21.1% expansion, Morocco surging 45.5%, and South Korea showing robust demand.

Despite operational improvements, free cash flow estimates remain below guidance due to working capital pressures and increased capital expenditure. According to Investing.com, the 2024 free cash flow reached €2.9 billion, with management targeting €2 billion or higher for 2025.

Market Impact

Jefferies maintains its Hold rating with a €48 price target, suggesting approximately 18% upside potential from current trading levels. However, the firm has revised this target to €52.00, reflecting Renault’s financial disclosures that align with the lower spectrum of market expectations.

The reclassification of Renault’s Nissan stake as a financial investment resulted in a substantial €9.5 billion charge, highlighting ongoing challenges in maintaining long-term alliance value. Excluding the Nissan stake, valued at €9.3 per Renault share, Jefferies estimates a core share price of €33.4.

Renault currently trades at 3.7 times estimated 2026 earnings on a core basis, excluding both Nissan holdings and capitalized research and development costs. The company plans to raise its dividend to €2.20 per share, representing a 19% increase from the previous year.

Strategic Insights

Ampere, Renault’s electric vehicle division, targets EBIT breakeven in 2025 while pursuing aggressive cost reduction strategies. The unit aims for a 40% cost reduction between first and second-generation C-segment EVs by 2027-28, primarily through battery cost reductions expected to fall by 50%.

The Douai plant exemplifies Ampere’s cost leadership approach, targeting production costs comparable to Eastern European facilities. Current annual capacity stands at 400,000 units, with expansion plans to reach 620,000 by 2028.

Jefferies recommends a swap and cancellation of cross-holdings to optimize capital structure, potentially reducing Renault’s share count by 6.5-10% through eliminating 10-15% of cross-holdings. This strategic move could support financial health while addressing valuation concerns.

Expert Opinions and Data

Analyst Philippe Houchois maintains his neutral recommendation, noting that “the conventional aspects of Renault’s revival have likely concluded.” He emphasizes that focus now shifts to strategic decisions for future value creation, including potential monetization of the Nissan stake and collaboration with Geely.

Houchois suggests that brands should exchange their cross-holdings to support financial health, advocating for proactive management of alliance relationships. The analyst warns that if Nissan chooses to sell its 5% stake in Renault, the company should repurchase it to avoid negative valuation signals.

The forthcoming “Futurama” plan and CEO succession could deliver mixed strategic messages if not carefully managed, according to Jefferies research. The investment bank cautions that global expansion focus might create uncertainty rather than clarity for investors.

Conclusion

Renault demonstrates solid operational performance with improved margins and strong international growth, yet faces complex strategic challenges that extend beyond traditional cyclical recovery metrics. The company’s transition from turnaround story to re-rating proposition requires careful navigation of alliance relationships, particularly with Nissan, and clear strategic direction amid leadership changes.

Investors continue monitoring Renault’s ability to generate consistent free cash flow while managing increased capital expenditure for electric vehicle and technology investments. The success of Ampere’s cost reduction targets and the resolution of cross-holding structures remain critical factors determining the company’s long-term valuation trajectory.