How One Of The World’s Oldest Automakers Kicked Everyone’s Butt Last Year

The conventional wisdom in the automotive industry over the last couple of years has been, roughly, the following: Japanese carmakers exist mostly to sell cars to Japan and America; American carmakers exist mostly to make trucks; Tesla is the only EV automaker outside of China that’ll ever make money; Chinese automakers will destroy markets when let out of China; and most European carmakers are doomed.

I’m not sure, ultimately, that any of this will end up feeling correct in a few years. The Morning Dump will take a Slate-ian turn today and will act, to some degree, to counter some of the conventional wisdom of the day. And I’m going to start with Renault, the 19th-century automaker that’s kicking a fair bit of tuckus here in the 21st century.

And it’s not like Tesla is doing all that well, anyway. Managers seem to be worried that the boss’s extracurricular activities are hurting day-to-day operations. It’s always good to question the boss, which is how Nikola employees might have avoided the company’s recent bankruptcy (though, maybe not). Nikola, it should be remembered, was valued higher than Ford Motor Company at one point.

Mercedes is a European automaker that’s not doing so hot, sure, so maybe not all conventional wisdom is wrong.

Renault Had A Record 2024

The automaker we now think of as Renault was founded in 1899. If you’re not good at math, that’s a long time ago. That’s 104 years before Tesla came to exist. That’s 12 years before Chevrolet and four years before Ford. What I’m saying is: the company is old. Given all the upheavals in the automotive industry, you’d think a French car company that’s partially owned by the French state would be doing quite poorly right now. For Stellantis, that’s undoubtedly true.

Renault, though, is knocking it out of the park. It’s not a huge park, right? It’s not launching one over the wall in right at Wrigley Field. They don’t play baseball much in France, so let’s just say it’s knocking a tennis ball over the stands at Roland Garros Stadium. It’s still pretty impressive!

It’s also an apt metaphor, as Renault, especially sans Nissan, is mostly focused on Europe and a few other regional markets. Renault doesn’t sell cars in the United States and, very much unlike its competitors, it doesn’t have a huge amount of exposure to China. It makes a range of affordable cars and trucks mostly for Europe, European adjacencies (Turkey, North Africa), and Brazil.

So far, this has turned out to be a remarkably good strategy for making money. Renault reported its earnings for the fiscal year 2024 (ending in March 2025), and the Renault Group earned record profits of $4.49 billion, ahead of its own forecasts. Perhaps even more importantly, the company managed a strong margin of 7.6%, which was also ahead of its own targets.

How’s it doing this?

“Renault Group continues to improve its operational performance, execute its strategy and deliver on its targets. 2024 was an important year with the first benefits of our unprecedented product offensive. This performance is the result of an in-depth transformation of the company driven by a remarkable collective work. We have turned Renault Group into a much more flexible, efficient and performant company.”

That’s CEO Luca de Meo talking to investors. If you ignore the corporate-speak translated into English, the core of it is that the automaker does three things quite well:

• Develops and produces cars efficiently, allowing it to make cheaper vehicles in a profitable way.
• Has the ability to adjust its product and production mix to meet consumer demands/tastes.
• Is building highly desirable cars for important segments in Europe.

Renault Group, now that Nissan is mostly out of the picture, consists of just three companies: Renault (including its Korean offshoot), Dacia, and Alpine.

At the bottom is Dacia, which makes the affordable versions of Renault/Nissan/Mitsubishi/Dongfeng platforms like the Dacia Spring (one of Europe’s cheapest EVs) and the excellent Dacia Duster subcompact crossover. Renault, the bigger brother, has the slightly nicer and usually more expensive versions of these platforms. Alpine, my favorite, has the sporty cars.

It’s a logical way to organize a modern automaker. Additionally, Renault seems to be the rare modern automaker that’s balancing both a strong hybrid lineup with extremely desirable electric cars like the Renault R5 E-tech.

Renault’s production is also split mostly between Europe (France, Spain), South America, South Korea, and Northern Africa. There’s also a huge production facility in Turkey, which has been beneficial to the automaker this year, as the exchange rate (the Turkish lira is down relative to the Euro) has been very much in Renault’s favor.

Can this last forever? An EU-American or a Chinese-American trade war would only help Renault, as the company largely sells inside Europe and outside of those zones. While an EU-American trade war might delay the launch of Alpine in the United States, it’s possible Europe ends up with better terms in future negotiations.

The company has warned of some potential issues, specifically around the EU’s emissions requirements. The company said it expects a margin of around 7% due to the impact of C02 restrictions and the potential need for the company to buy credits or pay penalties. It’s possible the EU delays some of those requirements.

Overall, Renault is the one traditional automaker that seems to be getting it right. Of course, all of this is relative. Its margins aren’t as high as Ferrari and it doesn’t sell as many cars as Toyota or Tesla. Renault, now that it’s not part of an alliance with Mitsubishi and Nissan, is just highly focused on making the right mix of cars for a smaller market, which isn’t a bad place to be in an uncertain time.

Renault is growing, maintaining or improving margins, balancing hybrid/electric platforms, and largely avoiding trade disputes. Few large automakers can say they’re doing two of those things, let alone all of them.

Tesla Managers Afraid ‘Elon Is Destroying Everything We Have Built’

What’s a non-judgmental and apolitical way to talk about Elon Musk? It’s hard. I don’t really have one.

The best I can do is let Tesla managers in Germany talk through the German business outlet Manager Magazine:

One person involved describes the state of mind of many executives as saying that they used to be proud to work for Tesla. “Now they are ashamed.” His fear: “Elon is destroying everything we have built.” According to another insider, practically no one in the management circle doubts that Musk is causing massive damage to Tesla. And it is completely unclear how to get out of the misery – or “if they will get out at all.”

Why would execs be so upset?

Musk comes by sporadically, say top people, puts the team in a rage, sometimes fires managers or even an entire team – and then disappears again. At Tesla, they call it pigeon-style management: “Fly in, give people a shit and fly off again.”

[…]

They also long dismissed the right-wing agitation that Musk vents on his network X as the “eccentricity of a billionaire”. But that is now over. Ever since he openly supported violent neo-Nazis in Great Britain, since he raised his right arm twice in a row as if in a Hitler salute at Trump’s inauguration and agitated at an AfD election campaign event in Germany just days later , there has been “constant chaos” in the company. A Tesla manager says that “sheer horror” is spreading.

I gotta remember “Pigeon-style management” as that’s a very German way to put it.

Tesla is still the envy of automakers, even as its sales are suffering. The question we’re not going to get an answer to, at least not concretely until the end of next quarter, is how much of Musk’s extracurricular activities are eventually going to hit the company’s bottom line.

Nikola Files For Chapter 11 Bankruptcy

There was a minute there when EV/hydrogen startup Nikola, which went public via a SPAC, was worth more than Ford Motor Company based on its public valuation. A lot of that had to do with GM tentatively agreeing to produce the company’s Badger pickup. If there was a peak of EV hype it might have been this moment.

Quickly thereafter, a short-seller investigation revealed that most of the claims by then-CEO and founder Trevor Milton were false. Milton was tried and convicted of fraud. In spite of everything the company did manage to produce and sell about 600 of its semi-trucks.

Now the company is filing for Chapter 11 bankruptcy protection with the hope of selling the existing assets. From Freight Waves:

Nikola has filed a motion seeking authorization to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code. The proposed bidding procedures, if approved by the United States Bankruptcy Court for the District of Delaware, would allow parties to submit binding offers to acquire Nikola’s assets free of the company’s debts and certain liabilities.

“Nikola intends to market and sell all, substantially all, or a portion of its assets and effectuate an orderly wind down of its businesses,” the company stated. Potential buyers could include both strategic and financial investors.

During the sale process, Nikola plans to continue limited operations, including certain directly provided service and support for trucks currently in use, as well as some HYLA hydrogen fueling operations through the end of March. After that point, the company says it will need partners to support these activities.

It’s not clear who a buyer might be.

Mercedes To Cut Production As Earnings Drop

Mercedes-Benz Group saw a 30% drop in operating profits last year, which is probably not going to shock you if you’re a regular reader of The Morning Dump. The company once commanded large margins for its luxury cars, reaching 12.6% in 2023. Last year? It was just 8.1%. This year? The company says it could hit a low of 6%.

A lot of this is rising costs, exposure to China, and the general weakness of Mercedes in Europe and the United States. So what’s the company going to do about it?

Per Bloomberg:

Mercedes will reduce the capacity of its German plants to about 900,000 cars from around one million. There are no plans to close plants in Germany but jobs will be cut through natural attrition.

Kallenius would not say how many jobs could be affected in Germany.

Mercedes plans to shift production of one of its compact cars from Germany to its plant in Hungary, where costs are 70 percent lower, CFO Harald Wilhelm said.

It will also outsource areas from finance and human resources to procurement, he said.

It’s a wild world where Renault seems like it’s doing better than Mercedes. As one analyst noted:

“We continue to liken Renault like a card player that may not have necessarily been dealt the strongest hand, but is squeezing and maximizing every point or trick,” Bernstein analyst Stephen Reitman wrote of the company in a report published in October. “It is proving that size alone is not a prerequisite and that speed and agility count for much as well, lessons that many of its larger peers seem to have forgotten.”

Damn, now I want to play cards.

What I’m Listening To While Writing TMD

In honor of Saturday Night Live‘s incredible 50-year run, here’s Elvis Costello and the Beastie Boys doing “Radio Radio.”

The Big Question

What’s your favorite Renault/Dacia/Alpine product?