Renault Technocentre October 3 rd, 2008
AGENDA 01 02 03 04 NEW MEGANE PROGRAM Bruno ANCELIN POSITIONING NEW MEGANE IN RENAULT COMMITMENT 2009 Patrick PÉLATA PURCHASING STRATEGY & SOURCING Odile DESFORGES C-SEGMENT SALES STRATEGY Patrick BLAIN 05 CONCLUSION AND Q&A Carlos GHOSN 2
NEW MEGANE PROGRAM Bruno ANCELIN SVP, M1/C SEGMENT PROGRAM DIRECTOR
AGENDA 01 02 03 04 05 06 MEGANE II BACKGROUND PRODUCT PERFORMANCE DEVELOPMENT & PRODUCTION COSTS SALES STRATEGY INTERNATIONAL OUTLOOK PROFITABILITY 6
01 MEGANE II BACKGROUND 7
MEGANE II SWOT ANALYSIS Strengths - 6 bodies covering all customer needs - Sedan adapted to international markets - Good COP at end of life - Robust volumes in lifecycle for all bodies except the hatchback - Innovative hatchback design at launch Weaknesses - Designed for the European market (except Sedan) - Purchasing & Manuf. structured for Europe - Quality issues at launch - Hatchback much debated design Opportunities - De-contenting & LCC sourcing for international bodies - LCC parts sourcing development - Reduction of short-term rental sales & adaptation of industrial capacities Threats - Raw material price increase - Decreasing markets for MPVs - New CO 2 regulations 8
02 PRODUCT PERFORMANCE 9
NEW MEGANE KEY POINTS ERGONOMIC & PRACTICAL DESIGN REASSURING HANDLING & DRIVING PLEASURE SAFETY 10
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SPECIAL CARE TAKEN ON PERCEIVED QUALITY 18
NEW MEGANE KEY SELLING POINTS #1 ERGONOMICS Analogue / Digital display with coloured speed monitoring Keyless car (walk away) 2 Navigation systems with central control Top 3 boot space TOM-TOM navigation < 500 (available from early 2009) - Automatic parking brake with central switch - Best-in-class seat height adjustment (70 mm) - Electric driver s seat - Dual zone auto climate control 19
NEW MEGANE KEY SELLING POINTS #2 REASSURING HANDLING & DRIVING PLEASURE Best-in-class road handling New axles Enhanced body roll & cornering stability More responsive steering - Body roll reduced by 9% enhanced cornering stability - Power steering : - 7% more lively - 20% stiffer - 4x faster responsiveness 20
NEW MEGANE KEY SELLING POINTS #3 SAFETY Reinforced side impact Dual chamber side airbags Rear seatbelt indicator Anti-whiplash headrests Keep leadership in passive safety Megane III is 25% safer than Megane II on side impact Maintain excellent level on front impact Expert in active safety Offer best-in-class active safety features (ESC, EBS ) 21
QUALITY TOP 3 TARGET 100 90 Warranty claims after 12 months (Base 100 = Jan 2003) 80 70 60 Objective :! Reach the best ever level by Renault in C segment! Be Top3 50 40 30 20-20% 10 0 Jan 2003 Mar 2007 22
INITIAL QUALITY Clio 3 Same level as Clio III and Laguna III, but obtained 1 month before schedule reached with 2 prototype batches instead of 3 Laguna 3 Mégane 3 0 Prototypes Manuf. approval 23
DURABILITY 1.2 1 Number of incidents per 1,000 km on test fleets Validation fleet : - Before SOP 45 cars 1.6 million km - After SOP 100 cars 5 million km 0.8 0.6 0.4 0.2 0 Engineering prototypes Plant prototypes Pre-series 24
WARRANTY COSTS Evolution of manufacturer s warranty cost per unit (Base 100 = 2006) 2006 2007 2008 2009 Megane II Megane III 25
ENVIRONMENT AIMING TOP EMISSION LEVEL ON DIESEL CORE ENGINE 1.5L 110hp Confort Megane III (2009) 115 g/km CO ² 115 g/km CO ² 119 g/km CO ² 119 g/km CO ² 119 g/km CO ² 1.5L 110hp Confort Megane III (2008) 1.5L 105hp Expression Megane II 120 g/km CO ² 120 g/km CO ² 125 g/km CO ² 125 g/km CO ² 135 g/km CO ² 139 g/km CO ² 26
ENVIRONMENT MEGANE III IS BIGGER BUT LIGHTER 63 kg saved at isovolume 1,235 kg 1,225 kg 27
03 DEVELOPMENT & PRODUCTION COSTS 28
MEGANE DEVELOPMENT CARRY-OVER OPTIMIZATION Megane II (X84) platform 134 parts (25%) reused Commonality Between 6 models to minimize specific development SPECIFIC CARRY-OVER MODIFIED CARRY-OVER Laguna III (X91) Trim parts with high quality level Other models Trim parts to reduce development & investment 29
MEGANE DEVELOPMENT ENTRY TICKET REDUCED BY 30% VS. MEGANE II (facelift + life cycle) TOTAL ENTRY TICKET = -30% Facelift + lifecycle = -43% 2.5 Carry-over (phase1) Engineering productivity + Technical savings Single plant for hatchback Quality Safety CO 2 Body Differentiation (Coupe, MPV 7-seater) + new engines 1.9 (phase1) Development & investment fees (achieved) = -25% Megane II range (6 bodies) in billion euros Megane III range (6 bodies) 30
MEGANE DEVELOPMENT THE SHORTEST SCHEDULE IN RENAULT S HISTORY Pre-contract Start of Design freeze Off-tool Production Sales Mégane 2 40.5 months 7 12.5 17 4 Clio 3 36 months 4.5 10.5 17 4 Megane 3 34 months 4 11 16 3 31
MEGANE RANGE LAUNCH THE SHORTEST SCHEDULE IN RENAULT S HISTORY Megane 1 (1995) +11 months +16 months +42 months MPV Saloon Cabriolet Estate Megane 2 (2002) +12 months +18 months MPV 7 seats Megane 3 (2008) Hatch +3 +7 +8 +10 +17 months 6 bodies launched within 17 months (5 within 10 months) 32
04 SALES VOLUMES 33
SALES VOLUMES REALISTIC SALES VOLUME ON A FLATTER LIFE CYCLE Mégane II & III 6 bodies Sales record & forecast (x 1,000 units) VEHICLE LIFECYCLE VEHICLE LIFECYCLE Mégane II Mégane III SALES GAP SALES GAP 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 34
SALES VOLUMES MEGANE III HATCH Mégane II & III Hatch Sales record & forecast (x 1,000 units) Mégane II Mégane III VEHICLE LIFECYCLE SALES GAP VEHICLE LIFECYCLE SALES GAP 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 35
05 INTERNATIONAL OUTLOOK 36
INTERNATIONAL OUTLOOK 2 SPECIFIC MODELS FOR INTERNATIONAL CONQUEST L38 Sedan! Specific design! Replacement for current Megane II Sedan and SM3! 90% of sales forecast outside Europe! Cost reduction Vs. X95 (non-visible decontenting + LCC sourcing)! Mid level base specifications, up-gradable to European standards B32 - Hatchback! «B95 skin with L38 technical content» - Design of Megane III hatchback (B95) - Platform of L38 Sedan 37
INTERNATIONAL OUTLOOK IN 2009, 2 PLATFORMS WITH 4 DEDICATED PLANTS J95 R95 E95 DOUAI X95 platform B32 L38 BURSA X38 platform B95 PALENCIA X95 platform BUSAN D95 X95 platform L38 X38 platform K95 Lower cost X38 platform 38
POSITIONING NEW MEGANE IN RENAULT COMMITMENT 2009 Patrick PÉLATA EVP, MARKET AREA EUROPE
YOUNGER MODEL RANGE FOR GROWTH IN EUROPE 5.0 Age (years) 4.5 4.0 3.5 3.0 2.5 Monthly average estimated model age 2.0 1.5 2001 2002 2003 2004 2005 2006 2007 2008 2009 42
RENAULT POWERTRAIN AND CO2 COMPETITIVENESS 43
TRUE TO OUR ROOTS! «De l avant-garde mais sans excès, pour des véhicules légers, des prix modestes et des moteurs de qualité répondant aux besoins des clients»! Avant-garde but without excessiveness, for light weight vehicles, modest prices and quality motors meeting customers needs. Louis Renault - 1901 44
190 CAFE EVOLUTION RENAULT S AVERAGE IS ON TRACK WITH REGULATION CO 2 emissions (g/km) Base Europe G5 (Fr, U.K, Ita, Sp, Ger) 180 ACEA targeted average 170 160 Renault Milestone #1 150 146.6 g 140 130 141.3 g Milestone #2 CO 2 regulation 120 H1 2008 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year 45
1,200 IN-LINE WITH RC2009 120 & 140g CO 2 COMMITMENT WITH A HIGHLY COMPETITIVE OFFER UE 27 Sales (thousand vehicles) Emission level (g/km CO 2 ) 101-120 121-140 1,005,000 Renault Market Share in Europe G5 in H1 2008 (%) 25% 1,000 20% 800 600 42 versions 151 versions 16% 15% 15% 400 1/3 emitting less than 120 g/km CO 2 333,333 393,000 9% 10% 200 16 versions 47 versions 5% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0% 46
RENAULT POWERTRAIN STRATEGY!! Offer best cost-to-value ratio to customers - Total Cost of Ownership - CO 2 reduction - Durability - Fun to drive! Improvement of conventional technology - dci Diesel line-up continuous evolution - TCe gasoline line-up deployment - Transmission line-up improvement! Breakthrough to zero-emission" vehicles with electric powertrains 47
EV: A STRATEGIC MOVE 48
WHAT DRIVES THE EV? Well to Wheels analysis for gco 2 per km (Source: JRC/Eucar/Concawe & Renault) Megane 1.6 115ch Gasoline Megane 1.6 115ch GNV European mix Megane 1.5 dci 85ch Diesel Toyota Prius Hybrid Gasoline Coal (w/o CCS*) Coal (IGCC*) 108 122 121 139 163 192 European mix Natural gas 58 57 Wood Nuclear Windmill 2 0 9 CO 2 emissions (g/km) Well to tank Tank to wheels 0 20 40 60 80 100 120 140 160 180 200 * CCS = capture & sequestration of CO 2 * IGCC = Integrated gasification on a combined cycle 49
ULTIMATELY CHANGE FROM OIL CYCLE TO SOLAR CYCLE Wind SOLAR ENERGY OIL REFINEMENT Zero emission SOLAR ENERGY 15 m² OIL 100,000 YEARS GAS STATION 15,000 km a year CO 2 from refueling stations to vehicle-to-the-grid concept 50
THE RENAULT ELECTRIC VEHICLE LINE-UP From 2009 onwards, progressive demonstrations Test fleet before end of 2009 e-sedan 2009 2010 2011 2012 e-kangoo Specific EV Mass production 51
KEY TAKE-AWAYS FROM THE ISRAEL OPERATIONS 1. The Israel operation - Guarantees mass production, lowering the barrier-to-entry of volumes, - Makes the thinking of electric grid infrastructure (more) reasonable - Sets the example for governmental incentives allowing EV usage 2. The Israel operation has massive coverage in the media, and positive impact for Better Place and Renault 3. Israel is just the first step: other countries, regions or cities are coming... 52
THE RENAULT-NISSAN ALLIANCE ACTS TO MASS PRODUCE ELECTRIC VEHICLES BY 2011! Competitive schedule! Key breakthrough on batteries - High knowledge in the Alliance further to longstanding R&D activities in Nissan! Vision on business model and best partners - Project Better Place : adequate partner for the complementary investments! Early initiatives in progress - In Israel : high potential of an innovative business model associating main leverages - In USA : Nissan involvement for meeting Californian rules with EV starting 2010 - In Denmark, but also in UK and several EU countries 53
PURCHASING PERFORMANCE Odile DESFORGES SVP, PURCHASING CHAIRMAN & MANAGING DIRECTOR, RNPO
MEGANE III (X95) SPECIFIC VENDOR TOOLING 545 M 745 Target: -30% Achieved: -30% 380 M Mégane II range Mégane III range (6 bodies) 56
VENDOR TOOLING LCC SOURCING 100% % toolings sourced in LCC Results Target New Korean line-up 90% From Europe-based range Megane To LCC-based range 0% Twingo 29% Laguna 19% Kangoo 22% 45% 50% Other Western Europe 2007 2008 2009 Portugal 6% 57
FURTHER COST REDUCTION AN ADDITIONAL - 15% TO REACH - 50% TARGET FY 04 (reference) ALREADY ACHIEVED - 35%! Process optimization! LCC 2009 Target - 50% - 15%! Carry-over! Standardization! Diversity reduction! Process spec. down 58
LCC FOR HCC PARTS PURCHASES IN LCC FOR W. EUROPE PLANTS 50% 40% % LCC purchases for HCC plants 32% 37% Target 40% 30% 20% 14% 17% 22% 25% B95 10% 0% 2004 2005 2006 2007 2008 (2008) 2009 59
NAMASTE PLAN: INDIAN SOURCING FOR BETTER PERFORMANCE WORLDWIDE! Sourcing decisions in 2008:! Turnover: 240 M! Average actual savings: 17 % including logistics costs! Potential purchasing turnover in India: 850 M 60
ALLIANCE APPROACH TO ACHIEVE COST LEADERSHIP COST LEADERSHIP Growth in volume per part Business growth Complexity, diversity reduction Deep localization Logistics improvement Material optimization Spec challenge Alliance Component Productivity improvement 333 - Synergie 500 Supplier Respect, Trust, Transparency 61
SET A SINGLE ALLIANCE COMMODITY STRATEGY 19 joint teams by end 2008 35% RNPO parts turnover 1 Technical Strategy Standardization policy & the related technical strategy ACM 2 Sourcing Strategy 3 Total delivered cost Road maps Alliance Commodity Meeting and world-wide Alliance supplier base management 62
C-SEGMENT SALES STRATEGY Patrick BLAIN EVP, SALES & MARKETING
AGENDA MEGANE III SALES STRATEGY! C-Segment history! Marketing positioning! Feedback on customer tests! Sales volumes! Customer channels! Price strategy, including residual value! International outlook 64
01 MEGANE III SALES STRATEGY 65
16,000 C-SEGMENT ACCOUNTS FOR 1/3 OF THE WESTERN EUROPE TIV PC TIV C-segment PC registrations (x 1,000 units) Market weight (%) C-segment weight 35% 14,000 30% 12,000 10,000 25% 20% 8,000 6,000 4,000 15% 10% 2,000 5% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 0% 66
HATCHBACK SALES ARE STABLE IN W. EUROPE C-SEGMENT OVER THE LAST 5 YEARS 100% 90% 80% 70% 60% Coupé-Cabriolet Mégane Estate MPV 50% 40% 30% 20% Hatch 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD Aug 08 67
C-SEGMENT IS RENAULT S CORE BUSINESS 800 000 Western Europe PC + LCV Sales (x 1,000 units) Renault Market share (%) 16% 700 000 R19 Mégane 1 Mégane 2 14% 600 000 12% 500 000 10% 400 000 8% 300 000 6% 200 000 4% 100 000 2% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD 2008 0% 68
MARKET POSITIONING STYLING! Sporty! Reassuring! Sleek / Elegant! Consensually appreciated modernity DRIVING PLEASURE! Dynamic! Powerful! Roadholding PRICE VS. EQUIPMENT!Very persuasive equipment & perf. vs. price ratio Positioning A STYLISH, DYNAMIC AND REASSURING CAR USPs! Dynamic! Easy Claim justifications BSPs! Reassuring! Environment-friendly! Affordable 69
REALISTIC SALES VOLUME ON A FLATTER LIFE CYCLE Mégane II & III Hatch Sales record & forecast (x 1,000 units) VEHICLE LIFECYCLE Mégane II Mégane III SALES GAP VEHICLE LIFECYCLE SALES GAP 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 70
BASED ON AN OPTIMIZED CHANNEL MIX Mégane Sales by type of client (Fr, U.K, Ita, Sp, Ger) Retail Fleet Self registrations Short term rental 2003 2004 2005 2006 2007 2008 2009 71
LEADING TO THE IMPROVEMENT OF THE VARIABLE NET REVENUE (5 MAJOR EUROPEAN COUNTRIES) Net revenue per unit ( ) (Fr, U.K, Ita, Sp, Ger) Price + version mix S&M exp. + channel mix + 13.4% Mégane II 5-door Hatch 2006 Mégane II 5-door Hatch 2007 Mégane III 5-door Hatch 2009 72
INTERNATIONAL OUTLOOK L38 - Sedan More than double the volume of Sedan (Mégane II + SM3) worldwide B32 Hatchback Increase significantly our C-segment hatchback presence outside of Europe 73
CONCLUSION! A line-up fully covering market and customer needs in Europe! Ambitious but realistic objectives! «Super selective» policy! Specific bodies to improve our performance & conquer new markets outside Europe 74
CONCLUSION Carlos GHOSN PRESIDENT & CEO