Renault's Ampere ambitions tested by choppy IPO and slow EV markets

Weaker electric vehicle (EV) demand, increased competition from China and market volatility are complicating French carmaker Renault's plans to list its EV business Ampere, four people familiar with the matter told Reuters.

Renault aims to extract more value from Ampere through an initial public offering (IPO) but is unlikely to go ahead if the final valuation falls below €7bn (R138.2bn), two of the sources said. One of them said that the cut off point could be closer to €6bn (R118.5bn). 

Market conditions would make the IPO, now planned for next spring after being initially readied for the second half of 2023, difficult to pull off even at these valuations, they said.

Several European firms, including DKV Mobility, German gearbox supplier Renk and France's Planisware, have recently scrapped plans to go public citing market conditions, while automakers including Tesla have warned of slowing EV growth.

Some analysts had already questioned Renault's hoped-for valuation of up to €10bn (R197.5bn), with some suggesting the carmaker should pursue alternative options to raise cash.

The IPO is part of a radical overhaul plan by Renault CEO Luca de Meo. This includes spinning off Renault's engine business in a partnership with China's Geely and Saudi Arabia's Aramco and overhauling its Nissan alliance.

One European fund manager, speaking on condition of anonymity, said that given tough market conditions for IPOs Renault might ultimately have to take whatever valuation investors are willing to offer for Ampere to proceed.

Renault, which will hold an investor presentation on the IPO on November 15, said there could be short term market pressure but noted that the EV market share in Europe had risen to 20% in 2023 from 15% in 2022, and that independent studies estimated average annual sectoral revenue growth of 20% or more by 2030.

Ampere was the only pure EV player in Europe and “deserves to trade at multiples closer to its peers with its low-risk exponential growth”, Renault added in an emailed statement.

European car manufacturers and policymakers have also voiced concerns over a “flood” of cheaper electric cars from China, prompting the European Commission to consider imposing tariffs on imports.

De Meo said in September that the listing could value Ampere at between €8bn and €10bn (R158bn and R197.5bn) , above the French carmaker's own current market capitalisation of €9.55bn (R188.6bn).

UBS analysts had said on August 31 that Ampere was worth just €3bn-4bn (R59.2bn-R79bn) , warning Renault was one of the groups most exposed to Chinese competitors in Europe.

Barclays analysts recently put a €5bn (R98.7bn) valuation on Ampere, while last week Bernstein analysts wrote an open letter to de Meo advising him to scrap the IPO and consider selling Renault's 28% stake in Nissan instead to raise cash.

Renault said in its statement that the UBS and Barclays estimates were the lowest published so far, and that analysts did not have all the key metrics to value the company.

One of the people and a third one said that despite the market climate Renault remained determined for the time being to go ahead with the IPO, which would involve about 20% of Ampere's share capital.

That would be on top of about 10% of shares that will go to Renault allies Nissan and Mitsubishi, which have pledged to invest up to €800m (R15.8bn) in Ampere.

The IPO and the stake sales to Nissan and Mitsubishi would leave Renault holding between 60% and 70% of Ampere, the people said, cautioning that the figures could change.

Other EV makers have seen their market value fall sharply in recent months. Polestar listed at about $20bn (R373.5bn) last year but is now worth $4bn (R74.7bn) , while shares in Elon Musk's Tesla have lost almost a quarter of their value in less than two months.

The Ampere IPO would include a mix of Renault's shares and new shares and could happen as early as April 2024, one of the people said, depending on market conditions.