Renault to Follow Tesla's Price Cut Worldwide

Renault, one of the world's largest automakers, will review its pricing policies for electric cars worldwide to ensure it remains competitive following a wave of price reductions introduced by U.S. rival Tesla Inc earlier this year.

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Having already reduced prices several times in the United States, electric car maker Tesla on Friday dropped prices in Europe - including in France, Renault's home territory - as well as Israel and Singapore, as part of a global discount campaign it began in January in China.

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"For us to remain competitive, we need to look at the situation country by the country, market by market, and we won't give up until we find out how competitive we need to be," the Renault brand's chief executive, Fabrice Cambolive, told Trade Algo.

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There has been an increase of 9% in sales for the brand in the first quarter of the year, indicating that a restructuring strategy focused on the most profitable models is starting to pay off after 4 years of declining revenues for the brand.

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The rebound has continued into April, according to Cambolive. The company noted, however, that Tesla's price reductions have served as a shocker for competitors due to their price cuts.

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Despite a very limited discounting policy, Renault's Megane electrified model, one of its most popular models, rose sharply in March, as it received strong orders despite a very limited discounting policy on its electrified models. The price of the model has increased to the point where it is now equal to that of its main competitor, Tesla.

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The Tesla Model 3 in France starts at 41,990 euros, compared to 42,000 euros for the Megane electric car in France, and that's after Tesla cut the price last week.

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It is estimated that 3,370 Megane E models were sold in France in the first quarter of the year, compared to 3,158 Tesla Model 3s, although a total of 9,364 of the U.S. company's more upmarket SUV Model Y models were also sold.

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"There is no question that (Tesla cutting prices) is potentially a challenge, starting with the cost side of things. It is a warning for us to take notice," Cambolive said.

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Renault's global sales for the first three months of the year stood at 354,545 vehicles, a record number for the brand.

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A group-wide decline in sales of the whole company, which also produces Dacia and Alpine cars, is expected to be revealed by the company on Thursday. The decrease was attributed to the loss of the Russian market due to the war in Ukraine. The Renault brand, which accounts for two-thirds of the group's overall sales, registered a 9.4% drop in sales last year, the fourth consecutive year the company has suffered a decline in sales.

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The French company, which was hit harder than most rivals by the COVID-19 crisis and a global chip shortage, is betting on higher-margin cars to boost profits and plans to spin off and list its electric vehicles (EV) unit on the market this year.

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Renault was an early mover in the electric vehicle race which then struggled due to Tesla's stellar growth, and ranked third behind Tesla and Volkswagen (VOWG_p.DE) in terms of sales in Europe last year, even though it had been a pioneer in the EV race. Moreover, Lexus (7203.T) and Tesla (7203.T) ranked third and fourth respectively in terms of electrified vehicles, which includes hybrids.

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It is clear that automakers are under tremendous pressure when it comes to cost and margins because Tesla's Shanghai factory workers have taken to social media to appeal to the company's boss Elon Musk after being informed of plans to reduce their performance bonuses at the weekend, according to online posts and interviews with employees.