RENOMMÉ RENAULT: how to increase your sales in a declining market? Rules of survival in the Ukrainian market from a French brand
Francois Marriotte, General Director of the official representation of Renault in Ukraine, shares the secrets of success with readers of Leadership Journey.
Leadership Journey (LJ): Mr. Marriotte, my first question concerns the overall situation in the Ukrainian automotive market. In 2018, after two years of growth, there was a recession again; moreover, the used car market for the first time exceeded sales of new ones. In your opinion, what is the main reason for the decline in sales of new cars?
Francois Marriotte (FM): This is obvious: the uncontrolled import of used cars in a foreign registration is to blame. And since this is an unofficial import (the import was made without paying customs duties), their number in the country can be estimated only approximately. As a result, compared to 2017, the automobile market in Ukraine has declined by 1.17%: dealers of all brands sold less than 90,000 vehicles.
Today, the import of used cars is one and a half times higher than the sales of new cars
This year, the situation with unofficial imports is gradually normalizing, but this will have little effect on the ratio of new registered in the country and used cars. According to estimates, today the import of used cars is one and a half times higher than the sales of new cars.
LJ: Nevertheless, Renault remains among the leaders and is increasing its market share. Are you satisfied with the result?
FM: Last year, the Renault brand in Ukraine ended up with an excellent result: the market share grew by 0.5%, to 12.5%. Moreover, for four years in a row we occupy a leading position if we estimate sales collectively: cars and light commercial vehicles LCV. Today, one out of every four cars sold in the country is a representative of the Renault brand, and in the LCV segment, it is the sole leader.
Thanks to a set of consumer qualities, Renault cars meet all customer needs: functionality, modern equipment, comfort, competitive price
LJ: What are the components of a business strategy that led to this success?
FM: Our leading position is a consequence of the high quality of the product we offer. Thanks to a set of consumer qualities, Renault cars meet all customer needs: functionality, modern equipment, comfort, competitive price. In the campaign “Avtomobil Roku 2019”, the Duster crossover of the new generation received the title “Crossover of the Year” – isn’t this the best recognition of the high quality and popularity of the brand in Ukraine? However, it is not enough to have a great car – it needs to be sold, serviced and repaired. In other words, market success is also a question of service, a question of the dealer network. Renault in Ukraine has a well-established network of dealerships with a high level of service. Service and a wide network – this is our advantage, our strength.
When you are successful for four years in a row, you hardly need to radically change the approach to work. Therefore, we will continue to adhere to the business strategy of recent years, making the main bet on the crossover segment, which is currently the most popular in Ukraine, as well as on commercial vehicles. Among the crossovers, the main novelty of 2019 is the new Kadjar, a compact C-class city car. In total, there are five crossovers in the Renault model range: in addition to the mentioned Duster and Kadjar, these are Stepway, Captur and Koleos. A commercial line includes Dokker Van, Trafic, Master and electric Kangoo Z.E.
TODAY EVERY FOURTH PASSENGER CAR SOLD IN UKRAINE IS A RENAULT
LJ: Renault is one of a few companies that officially sells electric cars in Ukraine. Does this mean that you personally and the company’s headquarters consider this segment to be promising, despite the still low level of electromobile infrastructure in our country?
FM: Electric cars are definitely the transport of the future. Look at Europe, where the demand for such cars is growing almost everywhere. For example, in Norway, they occupy more than a third of the market. Of course, not only the desire of people to breathe clean air plays a role but also a high purchasing power, coupled with government programs to encourage the purchase of electric cars. In Ukraine, not everything is as good as we would like – for example, although there are some tax breaks, there are no subsidy programs at all. Nevertheless, electric cars in Ukraine have prospects.
ELECTRIC CARS ARE DEFINITELY THE TRANSPORT OF THE FUTURE
Being one of the leaders of the electromobile direction in Europe, Renault intends to develop this segment in Ukraine, even though it’s a small market in terms of sales of electric vehicles, I would even say, a tiny market against the background of Europe, China or the USA. However, the deterioration of the environmental situation will eventually raise the question of the need to switch to electric cars to the government of the country and the owners of transport. Activities in this direction should be started today. We are ready to develop an ambitious development plan for the electromobile market in Ukraine, but we are not able to do it alone. Participation of the state is necessary. Not just declarations but concrete initiatives to support electric transport.
LJ: What direction of sales of electric cars do you see as more promising: corporate segment or sales to individuals?
FM: Last year, the segment of new electric vehicles in Ukraine developed primarily due to the growth in corporate sales to various state and private companies, including taxi services. In 2019, this trend will continue. We are getting more and more similar requests: “We want to introduce environment-friendly mobility into our business model and build a business using electromobile solutions”. The Renault Ukraine company has a finger on the pulse: among other things, we participate in various tenders for the supply of electric cars.
In this segment, we do have offers for a corporate client. Now on the Ukrainian market, there are two Renault electric models, which have already proven themselves in Europe and, I hope, will be in demand in Ukraine. Firstly, this is Zoe, a compact urban hatchback with a range of more than 350 km, and secondly, Kangoo Z.E., a multi-purpose cargo-passenger model, which is offered in versions with two or five seats and can be used for quick delivery of various goods in cities.
LJ: So, in both segments – cars and electric cars – Renault Ukraine relies on corporate sales. What is their share now, what is the company doing to develop this direction?
FM: Indeed, corporate sales today are the most promising. If we talk about classic models with internal combustion engines, three models of Renault are the most in demand in this segment: Logan, Dokker and Duster. The Duster crossover deserves special attention: due to its versatility and competitive price, it is not only the best-selling passenger car in the Ukrainian market but also the most demanded model among corporate clients. In the Duster sales structure, this segment (corporate clients) accounts for two thirds of sales.
These three models fully cover customer needs, which allows the Renault brand to be today the leader of the Ukrainian corporate sales market with a share of 21%. This is a very good result.
In the near future, we intend to retain our leadership. There are all prerequisites for this: a wide model range, an extensive dealer network, own financial instruments of sales promotion and quality service.
WE ARE READY TO DEVELOP AN AMBITIOUS DEVELOPMENT PLAN FOR THE ELECTROMOBILE MARKET IN UKRAINE
LJ: Two factors are of particular importance to corporate clients: a wide network and quality of service. How systemic is Renault Ukraine in developing these areas?
FM: Now, Renault Ukraine network has 35 dealer centers. Each of them is staffed with professionals: they know the needs of customers; they know how to maintain and repair cars. Our dealers are focused on servicing companies’ car fleets that cannot afford downtime due to vehicles breakdowns. We are ready to provide necessary assistance within just a few hours. The combination of a good product and quality service allows us to offer comprehensive solutions to corporate clients.
LJ: In your opinion, what mechanisms in the current economic conditions could contribute to increasing the new cars’ demand in Ukraine?
We should all understand that toughening the import of outdated used cars is the only way to build a stable and developing automobile market
FM: First, I would tighten control over the import of used cars. And this is not only a question of the regulation of sales of new cars — it is a question of road safety and environment. You can keep upgrading the quality of roads, but if cars in a poor technical condition will ride the roads — which is typical for the imported used cars — this will never solve the traffic security problem. Environmental pollution is the second negative social effect of their influx into Ukraine. In Europe, the operation of these cars is limited or completely prohibited, because they do not meet current environmental regulations. Instead of going to the scrap, they are sold to Ukraine — the country turns into a garbage dump.
Therefore, the government needs to look at the problem more broadly, and the Ukrainians themselves should not think in terms of “here” and “now”. We should all understand that toughening the import of outdated used cars to the country is the only way to build a stable and developing automobile market. Only, in this case, global automakers will be interested in the Ukrainian market and will invest in its development – including through the opening of their own assembly sites here. And this, in turn, will favorably affect the country’s economy and the welfare of its citizens. In short, this closed loop must be broken.
LJ: How do you assess the prospects of the Ukrainian automobile market in the next five years?
FM: In the mid-2000s, the annual sales of new cars in Ukraine were calculated in hundreds of thousands, reaching a peak in 2008, when almost 700,000 units were sold. Returning to that level today seems fantastic, but the development of the economy will contribute to a gradual increase in demand. Given the scale of the country and the volume of pent-up demand, I would say that in the medium term of 10–15 years, the potential capacity of the Ukrainian car market could be 500,000 cars. Well, in the next four to five years, it can grow to 300,000 units. We at Renault Ukraine believe in the country’s potential and expect that by that time the share of Renault car sales in the Ukrainian market will reach 15%.
LJ: What are your goals as the Head of Renault Ukraine?
FM: When a company starts a business in another country, it must pursue two goals that complement one another. It is not only about profits in a particular foreign market, but also about the development of the economy of this country. This is a long-term strategy, which Renault adheres to in all countries of presence, including Ukraine. Our plans for the next five years include large-scale investments in innovations that will not only help develop the dealers network and increase market share but will also work on the company’s image and Ukraine as a country with a systematic approach to doing business.
The Renault brand officially came to Ukraine almost 20 years ago and is still here, despite all the difficulties and occasional crises on a national scale. This is our difference from the one-day brands that come to Ukraine; they have been selling for two or three years, and then leaving the market, forcing buyers to solve problems with service and search for spare parts. Renault has a different business model: development on a long-term and sustainable basis. We believe in the economic potential of Ukraine. That is why our investments here are systematic.
LJ: What steps will the company take to maintain the current leadership position in the Ukrainian market?
FM: Our first priority is to provide a strong and competitive model range. The second priority is the development of the dealers’ network: in the next few years, we plan to expand it to 50 centers in order to better satisfy the needs of our customers throughout the country. In parallel, it is necessary to invest in a long-term partnership with our dealers. So, a strong model range, a strong network, and a strong team.
Renault Ukraine is an integral part of the global company Renault. High competence and professionalism for us are always in priority. In this regard, Ukraine has much to be proud of: when I had become the Head of Renault Ukraine, I was surprised by the highest level of professionalism of the local team. We are on the same level as European countries, and this allows me to look to the future with confidence.
PERSONNEL IS THE MOST VALUABLE ASSET FOR OUR COMPANY
LJ: Are there any peculiarities of the Ukrainian mentality in the context of Renault corporate culture transfer?
The distinctive feature of the Ukrainians is their positive attitude; they are smiling, even if something is not going well
FM: A distinctive feature of the Ukrainians is their positive attitude; they are smiling, even if something is not going well. This is one of the strengths of Renault Ukraine employees. Multiply this by the desire to develop and achieve goals – and you get a dream team. For our company, personnel is the most valuable asset, and my task of the Head of the representative office is to contribute to its retaining and development.