PARIS (Reuters) – A slowdown in demand for electric vehicles, increased Chinese competition and turbulent financial markets are complicating the planned IPO of Renault’s future electric entity, Ampère, set to play a central role in the transformation of the automobile group more than a century old, four sources close to the matter told Reuters.
Several analysts have recently questioned the ability of the diamond group to obtain the hoped-for valuation of up to ten billion euros for its future small business, with estimates as low as 3-4 billion euros in one case and five billion in another, or suggested that the French automaker turn to alternative options to raise funds.
Some investors also remain cautious, and according to a European fund manager, speaking on condition of anonymity, market conditions are such that they could ultimately lead Renault to accept whatever valuation investors are willing to pay. fix for Ampère, if he wants the IPO to take place.
The IPO, initially scheduled for the second half of the year “at the earliest” and now envisaged for spring 2024, should allow the manufacturer to extract more value from its electrical and software business and play a central role in the restructuring of Renault to stay in the accelerating race towards electrification.
Several European companies, including DKV Mobility, Germany’s Renk and France’s Planisware, have recently reversed their plans to go public while automakers like Tesla have warned of a slowdown in the growth of electric vehicles due to high interest rates.
But according to two sources close to the matter, it is unlikely that the IPO will go through if the final valuation is 7 billion euros, or less.
One of the sources clarified that this pivot point was closer to six billion. And for both sources, even at these levels, the project could prove complicated to complete given current market conditions. The operation is at the heart of the radical restructuring of the Renault group initiated since the arrival of Luca de Meo in 2020. Designed as a “disruptor”, the entity intends to acquire an image as a pure player in electric and software in the face of the ambitions of new entrants like Tesla or Chinese brands.
Alongside Ampère, Renault has already split its historic thermal engine activities into a joint venture held with the Chinese Geely and the Saudi Aramco. Its strategy of opening up in all directions to new partners goes hand in hand with a softening of its alliance of more than twenty years with Nissan.
Renault, which will hold a much-anticipated capital market day (CMD) to detail its future entity to the market on November 15, said in a statement emailed to Reuters that “Ampère deserves to trade at higher multiples close to those of his peers.”
“Ampère is the only European pure player in electrical and software, with a growth profile with low execution risk,” added the group.
While recognizing headwinds in the electric market, Renault clarified that everyone was facing them. “There will be ups and downs, including short-term pressure, but the end point is clear,” the group continued.
Renault also recalled that with more launches of electric models than thermal models in Europe this year, this technology has reached a market share of 20% in Europe and should enjoy annual growth of 20% by 2030 .
UP TO TEN BILLION?
European manufacturers and politicians have also been concerned about the risk of a “wave” of cheap electric vehicles from China.
In an interview with the Financial Times, the general director of the French manufacturer Luca de Meo declared at the beginning of September, during the Munich motor show, that the entity could be worth up to ten billion euros, a figure higher than the Renault group’s own current market capitalization, which is 9.5 billion.
A few days earlier, UBS analysts had estimated that Ampère’s valuation could be only 3 to 4 billion euros because Renault is one of the European manufacturers most exposed to Chinese competition in Europe.
The group pointed out that UBS – and Barclays, with a figure of five billion euros – had the two lowest estimates already released.
“Analysts cannot yet correctly model Ampère because they are missing financial (indicators) which will be revealed as we get closer to the IPO,” added Renault.
In an open letter to Luca de Meo, Bernstein analysts for their part recommended that Renault instead activate the option of selling part of its stake – 28% – in its partner of more than twenty years Nissan .
A KEY PROJECT FOR RENAULT
Sources close to the matter stressed that despite the deterioration of the markets, Renault remained firmly determined to pursue the IPO of Ampère on the stock market, which would provide a free float of around 20% of the entity’s capital.
This would be added to the approximately 10% going to the two historic partners Nissan and Mitsubishi, who have committed to investing up to 600 and 200 million euros respectively in Ampère.
According to sources, Renault would thus retain between 60% and 70% of the entity, but these elements remain preliminary and still subject to adjustments.
Other manufacturers specializing in electricity have suffered on the stock market in recent months. Polestar, the electric brand co-owned by Volvo and Geely, was worth around $20 billion when it went public last year, but more than $4 billion today.
Tesla’s price has also erased almost a quarter of its value in less than two months. The introduction of Ampère should include a mixture of shares brought by Renault and new shares and could take place as early as April 2024, added one of the sources, always provided that the market environment allows it.
(Mathieu Rosemain, Silvia Aloisi, Anousha Sakoui, Pablo Mayo Cerqueiro, Elisa Martinuzzi, with Gilles Guillaume)
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