Renault's hit EV helps fend off Chinese rivals as quarterly sales rebound

By Gilles Guillaume and Dominique Patton

PARIS, July 23 (Reuters) - Renault Group sales rebounded in the second quarter as strong demand for its Renault 5 electric vehicle helped the French automaker resist mounting pressure from Chinese rivals rapidly expanding across Europe.

The French automaker sold 1.17 million cars and vans in the first six months of the year, down 0.4% from a year earlier, but said second-quarter sales rose 2.3% as it recovered from logistics problems at its Dacia brand and benefited from growing EV demand.

Renault said the improvement came despite continued gains by Chinese brands in Europe, where low-cost competitors have intensified competition and eroded market share for established automakers.

In Europe as a whole, by far its most important market, sales rose 2.6%, boosted by the success of the electric R5 and a return to growth for commercial vehicles.

Demand for electric vehicles has accelerated since the war in Iran triggered a surge in fuel prices.

"Encouraging" momentum in June supports the outlook for a better second half, said Michael Foundoukidis, an analyst at Oddo BHF.

Renault shares were flat. The stock has lost more than 25% of its value since the start of the year, pushing its market valuation to below €8 billion.

RESISTING A DISCOUNT BATTLE

Increased competition from Chinese newcomers as well as established rivals such as Stellantis weighed on Renault's market share in its three main markets of France, Italy, and Spain during the second quarter.

But rather than matching the steep discounts offered by some Chinese rivals, Renault is prioritising profitability over volume growth, executives said, arguing that aggressive price cuts can undermine vehicle resale values and long-term earnings.

"We don't want to do the same as what we see from some brands, the Chinese brands, going for huge discounts because you pay the bill in residual value a few months or years later", Ivan Segal, senior vice president of Global Sales and Operations for the Renault brand, told reporters.

As the smallest of the legacy automakers, Renault needs to protect its profit margins if it is to remain independent.

The group, which will release its half-year results on July 30, is targeting an operating margin of around 5.5% for the year compared with 6.3% in 2025, with an expected improvement in the second half versus the first.

In France, Renault has cut back on lower-margin sales, such as those to short-term rental companies, to focus more on retail customers, and is also avoiding heavy discounting.

Its Dacia brand also saw its sales improve quarter-on-quarter. The compact Dacia Sandero remains the best-selling car in Europe, the company said, although the budget brand is hampered by a limited electric vehicle lineup.

(Reporting by Gilles Guillaume and Dominique Patton; Editing by Muralikumar Anantharaman and Subhranshu Sahu)