Renault has announced that it is cancelling plans for an Initial Public Offering (IPO) of its electric vehicle business Ampere, citing difficult market conditions and lowered valuations for electric vehicle companies.
IPO Plans Halted After Months of Preparation
Renault originally unveiled its intention to spin off Ampere through an IPO in last March, with ambitions of listing the company on the Euronext Paris exchange in the first half of 2024.
This followed a trend of major automakers looking to capitalize on investor enthusiasm for electric vehicles by spinning off their EV operations into standalone companies. However, recent volatility and lowered valuations, especially in the tech heavy NASDAQ index, has led the French automaker to scrap its listing plans for now.
Ampere was intended to house Renault’s electric vehicle and software operations with Renault retaining a majority stake. As recently as last week Renault executives had indicated the IPO was on track, making this reversal a surprise.
| Key Ampere IPO Details | |
|---|---|
| Intended Listing | Euronext Paris Stock Exchange |
| Target Date | First Half of 2024 |
| Amount to be raised | €1.5-2 billion |
| Renault’s share | 80% stake, other 20% publicly listed |
The company has stated that while an IPO is off the table for now, it remains committed to separating its electric vehicle business as part of its Renaulution strategy.
Slumping Markets Behind Decision
After showing resilience for most of 2022, global financial markets have stumbled in early 2024 amid concerns over inflation and the prospect of an economic downturn.
Major US indices are currently in correction territory, having fallen over 10% from their highs last year, with the tech-focused NASDAQ bearing the brunt of the declines.
This has significantly cooled investor appetite for IPOs, especially in new age sectors like electric vehicles which carry higher risk profiles.
Valuations of listed electric vehicle makers and startups have also taken a hit, making the environment unsuitable for Ampere to achieve the desired $10-15 billion valuation that Renault was targeting.
While the company has not provided details on the decision, industry analysts believe Ampere’s IPO likely struggled to generate investor orders that matched Renault’s internal targets. This forced the last minute cancellation despite months of preparation.
Ampere Key to Renault’s Electrification Goals
The establishment of Ampere is a key pillar of Renault Group’s Renaulution turnaround strategy revealed in early 2021 by CEO Luca de Meo.
The plan lays out bold objectives towards electrification and software-defined vehicles while splitting out legacy combustion engine operations. Under this strategy Ampere is intended to drive Renault to:
- Achieve higher profitability with lower investment needs for electric vehicles
- Tap into dedicated pool of long-term investors focused on high-growth electric vehicle space
- Accelerate software and technology innovation through standalone unit
The automaker aims for electric vehicles to account for over 90% of passenger car sales by 2030, with 10 new battery electric models to launch in the next 5 years. The first of these – the electric Megane E-Tech – has already seen strong demand.
Ampere is central to this vision and was to play a leading role in mass market electric and software capabilities for the Renault Group.
Next Steps: Merger or Private Funding Options
With the IPO shelved for now, Renault has indicated it will explore alternative options to fund Ampere’s growth.
Merger With Nissan/Mitsubishi
One possibility is a merger between Ampere and the electric vehicle assets of alliance partners Nissan and Mitsubishi.
- The Alliance partners were already exploring participation in the Ampere IPO
- Would create a larger combined entity, improving scale and valuation prospects
However negotiating a complex merger with multiple parties poses risks of delays or failure to agree on terms.
Private Funding
Alternately, Ampere may look to raise private capital at a lower valuation instead.
- Would allow participation by key investors like Qualcomm who can provide technology expertise in addition to funding
- Gives Ampere funding needed for growth plans without public listing
While offering less publicity, private funding allows Ampere to postpone IPO plans till market conditions improve.
Status Quo
The third option is for Ampere to continue as a business unit within Renault Group for the time being.
- Allows Ampere to execute strategy with Renault’s balance sheet funding development
- Risk that Ampere doesn’t get focus and investment needed to achieve goals
Outlook Going Forward
While no longer listing in the first half of 2024 as originally planned, Renault appears firm on separating Ampere in the future.
For now, Ampere will likely explore private capital raising and continue focusing on its technology and product roadmap. Its electric vehicle momentum remains unchanged by this setback.
However if unfavorable market conditions persist even into late 2024, Renault may need to consider more structural changes in ownership of Ampere.
An outright sale to another automaker or technology company would raise funding while also achieving the goal of separating Ampere – though likely at a lower valuation without an IPO.
For investors, Ampere’s cancelled IPO highlights the risk of over-exuberance around electric vehicle valuations. While consumer adoption and government regulation continues to shift towards electric, underlying execution and financial viability remains paramount.
Renault’s share price has been resilient despite the Ampere IPO being called off, indicating investors see this as a prudent decision given weak IPO conditions rather than a concern over strategy.
The next 6-12 months will be crucial for Ampere and Renault Group to bounce back and regain momentum towards the Renaulution vision. How Ampere secures funding and grows over this period in the backdrop of shifting auto industry trends will decide if Renault made the right bet in the first place.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
