Posted Apr 22, 2022, 6:45 AM
Where is Dacia?
Fifteen years after the launch of the Logan, Dacia is entering the second phase of its history. Louis Schweitzer’s initial idea, then president of Renault, with the $5,000 car, was to stop a form of arms race. His bet was that you could succeed in automotive by blocking content. Not all consumers need or want more power, more electronics, more comfort… for an increasingly higher price. Even if the ingredients have partly evolved, it is always the same recipe that we apply with success.
What is this recipe?
It is unique and quite subtle. It’s about making choices for the customer, focusing on the essentials. I refute the term “low cost”. Our new Jogger, for example, has all the equipment considered essential: reversing camera, parking assistance, hill start… And this equipment evolves over time. Air conditioning, which was not essential a few years ago, has become essential. But unlike other manufacturers who offer a multitude of options, it is Dacia which sets the level of equipment in an almost standard way. This approach allows us to be much more efficient in both manufacturing and sales.
There is a product and a price, period. On cars like Jogger, we offer 350 versions by combining the possible options, compared to hundreds of thousands on some high-end competitor models. On the Spring, our small electric car, we offer two levels of equipment and five colours. It’s easier to choose a Spring than to choose a smartphone! In addition, by saving on certain equipment that could be considered superfluous, such as the electric adjustment of the position of the seats, you can also save a lot of weight. This allows us to trigger a virtuous circle. Because who says lighter car, says smaller engine, reduced consumption and therefore much more competitive total cost.
And on a more industrial level?
Dacia could not exist without the Renault group, which for us is like an organ bank. We are not in technological innovation but in the reuse of technologies already used on a large scale for years by Renault. But beware, Dacia engineers do not start from a Renault model wondering which parts we can remove to save money. They start from scratch, using common platforms and parts. We don’t get very far by removing 5 euros of equipment here or there.
To be truly competitive, you have to start from scratch. It’s called “design to cost” and it mobilizes thousands of engineers. We are also very efficient in calibrating our industrial tool. We compare ourselves more to the baker who has nothing left to sell at 8 p.m. because he preferred to miss out on the sale of three baguettes, than to the one who has to sell his bread so as not to end up with unsold items on the arm.
Why do you say Dacia is entering a new phase?
The global context has changed. Initially, the hunt for costs meant fewer materials, to obtain vehicles that were not only less expensive, but also lighter and less fuel-intensive. Today these specificities are even more relevant than before, in a context of increasing taxes on CO2 emissions. The competitiveness of Dacia’s offer is multiplied by the constraints that weigh on the automotive industry. For two years, with the increase in the cost of materials such as steel or aluminum, and that of standards, we have been in an inflationary spiral. Faced with this, more and more car customers favor rational purchasing.
Does the situation in Russia change anything for Dacia?
For Renault’s industrial activity in Russia discussions continue, during the suspension of activities. As for Dacia, we do not sell or produce cars in Russia. The current situation therefore does not change the brand’s roadmap as defined by the Renaulution strategic plan. Dacia should continue on the good momentum shown by the results of the first quarter.
Won’t your success end up cannibalizing Renault’s sales?
On the contrary, our brands are very complementary. Of 100 customers who buy a Dacia, 60 had not previously bought a car from the group. Dacia thus brings people into our common home. And when they renew their car, after having kept it for an average of 8 years, in France, 75% of them remain customers of the group: 60% take over a Dacia, and 15% a Renault.
Here too we can speak of a virtuous circle and Dacia is fully in line with the new Renaulution strategy devised by Luca de Meo, the group’s general manager. For a long time, Dacia was the little brand that was a little erased under the elbow of its big brother. Today, Dacia is asserting itself as a brand in its own right within a group in which the Renault brand will focus more quickly than us on electric cars and utility vehicles.
Will the Dacia end up being electric too?
The European framework will impose it, but it is up to us to define what electrification will mean at Dacia. Not everyone may want a really heavy car with huge batteries that can do 500 kilometers and recharge in 30 minutes, for a very high price. It is up to us to intelligently design cars that will meet the expectations and real needs of our customers. Don’t forget that there are 15 million cars in Europe which are used for short daily journeys and which do around 30 kilometers a day.
We grant ourselves a form of time shift. When we introduce the hybrid on the Jogger in 2023, we will use the E-Tech solution developed by Renault, which will be partly amortized economically, four years after its launch. The fact that our cars are lighter allows us to go below standard for longer than our competitors. From a macroeconomic point of view, it is far from neutral.
Can you be profitable by underselling the competition?
Dacia is profitable, but it is difficult to define its intrinsic profitability, since Dacia serves Renault, which itself serves Dacia. We don’t create cars and engines from scratch. We recover and use pre-existing organs within the group, which allows us to have moderate investments. The simplicity of the range and our focus on retail sales also help us.
We don’t discount or chase fleet sales in order to achieve the large volumes that would be needed to amortize multiple versions. Super-simple range, no discounts: Sellers don’t want to switch brands anymore, and people keep coming back. Because the discussions on the price are unpleasant for the buyer as for the seller.
But you’re still a bit trapped in one segment?
Dacia has two facets. The historic Dacia, of which we are proud, is the ability to sell to customers who want to buy a new car at all costs with a tight budget. But three-quarters of our sales are now made to people who have the perfect means and who will take the most equipped model. These are customers looking for a smart buy.
We have both buyers who want the cheapest car on the market, but also, and increasingly, buyers who want a car that is cheaper than the competition. With the rise in prices for both new and used cars, this trend could intensify. A growing part of the market will come to us. Dacia is the small brand that has not finished growing.
So you still have real growth potential?
Dacia shows very high growth, since in fifteen years we have gone from an exclusively Romanian brand to 50,000-100,000 cars, to 600,000 cars per year, and a total of 1 million vehicles per year in the group, counting also the Renaults designed on the same technical basis as Dacia, in certain countries such as Brazil. Although our range is reduced, we are already the first brand purchased by individuals in France, and the third in Europe.
We are now mainly present in the B segment of city cars, which represents just over 25% of the market. With Jogger, we are now entering the C segment of family cars, which represents nearly 37% of sales in the top five major European markets. The idea is to transpose our know-how proven in the B segment to the C segment. We are addressing an increasingly large market.
Finally, expensive cars are getting more and more expensive. The average price of cars sold in France in 2020, according to Argus, is 26,000 euros (and even 35,000 euros for C-segment crossovers). At Dacia, it’s 13,000 euros. But in a few years, the Euro 7 standards will arrive and will represent a big stair step to cross on the authorized CO2 emission standards. Heavy cars will become more and more expensive, as pollution control solutions will cause prices to skyrocket. It is not certain that the purchasing power of buyers evolves in the same way. In a few years, we will therefore have even more arguments.
But your low cost image may repel some buyers…
Price captures attention. Afterwards, you also need cars that make you want to. The advantage is that the design is not expensive. And our new chief designer who comes from Aston Martin is very motivated, because it’s extremely rewarding to make models that will be sold in large series! What we want is for people, seeing one of our cars, to think, “It’s got content, comfort, and it looks pretty!” And it costs much less than the competition. »
His journey
Denis Le Vot has spent his entire career with the Renault-Nissan-Mitsubishi Alliance. After joining Renault’s sales department in 1990, this graduate of the Ecole des mines de Paris gradually took over supervision of Russia, where Renault acquired AvtoVAZ, until being appointed director of operations for the Eurasia region in 2016. 2018, he became director of Nissan in North America. The Ghosn affair, and the tensions it generated between Renault and Nissan, led him to return prematurely to France, to the direction of commercial vehicles of the Alliance, then to the commercial direction of Renault. Luca de Meo, the new general manager of the diamond group, chooses him to lead Dacia and Lada from January 1, 2021.
Its news
Until now the low-cost brand of the Renault group, Dacia positioned itself last year as the favorite car brand of households in France, and the third in Europe. It wants to capitalize on its success to move upmarket and tackle the family car segment. To this end, it is launching the Jogger, a 7-seater crossover for less than 15,000 euros. This launch is part of the more general strategy undertaken by the new general manager of Renault, Luca de Meo, who wants to be offensive in this segment, which is more profitable. The planned withdrawal of the group from Russia could indirectly impact Dacia insofar as part of the brand’s economies of scale depend on the pooling of investments and parts with the Lada brand, from which the Diamond will undoubtedly have to separate.