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On Friday, Morgan Stanley (NYSE:MS) downgraded Renault SA (OTC:RNLSY) (RNO:FP) (OTC:RNSDF) from Overweight to Equalweight, also reducing the price target to €47.00 from €59.00. The adjustment comes despite the automaker’s solid performance in the previous year, where it was the only company to expand its margins. Renault (EPA:RENA)’s recent reiteration of its guidance and the expected continuation of product pipeline tailwinds through 2025 were acknowledged.
Renault’s advantage of not being exposed to the markets in China and the United States was a significant factor in its outperformance compared to its European counterparts. However, this same positioning is now seen as a potential vulnerability. According to Morgan Stanley, the company’s current scale and balance sheet could leave it susceptible to competition from Chinese OEMs expanding in Europe and the rest of the world.
The possibility of Renault entering into value-generative joint ventures with Chinese OEMs was mentioned as a potential strategy for the company. These partnerships could establish Renault as a local partner for manufacturing and distribution in Europe and other markets. Nonetheless, there are concerns about the potential reduction in European tariffs on China’s battery electric vehicles (BEVs), which may be perceived as more beneficial to German OEMs than to Renault.
Morgan Stanley’s analysis suggests that the current year might represent a peak for Renault’s margins. The forecast is influenced by the evolving competitive landscape, especially as Chinese automotive companies make inroads into European markets. The firm sees both opportunities and risks for Renault in the near future, with the potential changes in trade policies adding to the uncertainty.
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