Why Renault’s push to cut development costs by 40% is key to future survival

Why Renault’s push to cut development costs by 40% is key to future survival

Automotive News Europe — 2026-02-19

Automotive Industry

Renault Group has managed to cut development time to less than two years for its newest EV, the Twingo minicar, in an effort to match the speed and efficiency of Chinese rivals.

Now, it’s trying to reduce new-model costs by up to 40 percent, using lessons learned from its Shanghai R&D center, CEO Francois Provost said.

For Renault and Provost, cutting the so-called entry ticket price is an existential quest. Renault’s future viability can be ensured only by matching Chinese automakers’ development times and costs, they say.

Chinese automakers in December recorded a European market share of about 10 percent, compared with a 6.1 percent share for all of 2025, about twice the share they held in 2024.

To develop the Twingo — which will also have variants for Dacia and Nissan — Renault created the Ampere China Development Center, or ACDC. The Ampere standalone EV unit is being reabsorbed into the larger Renault Group, but the Twingo will serve as “proof of concept” for future models, Provost said Feb. 19 on a call with investors.

“We think we are capable of up to minus 40 percent entry ticket reduction for new model development compared to the previous generation,” Provost said. He said a big reason for this belief is because Renault can “assess in detail the way the Chinese ecosystem is doing, thanks to our ACDC development center in Shanghai.”

The next step is to transfer the learnings from China to Europe, he said. “In the next midterm plan our challenge is to make this a standard, and demonstrate that Renault is capable, with our suppliers, to develop models within two years,” Provost said.

Shorter development times also bring lower costs because there is less need for labor, validation and testing and modeling.

Other European automakers are also seeking ways to trim costs this year. Volkswagen Group will present a plan to cut expenses by 20 percent by 2028, according to Manager Magazin in Germany. The report cited high software costs and the dual development of electric and internal-combustion engines.

As part of a multibillion-euro cost-cutting plan, Mercedes-Benz will reduce global capacity by more than 10 percent, CEO Ola Kallenius said Feb. 12.

Analysts said that Renault might have to work with Chinese suppliers to meet its target.

“This is a very large reduction target that can only be achieved with a very strong collaboration with Chinese suppliers as well as the collaboration with Renault’s R&D center in Shanghai, which has already allowed the firm to develop the Twingo in less than 2 years,” Jose Asumendi of JP Morgan said in a note to investors Feb. 19.

Renault has already turned to Chinese suppliers for the electric motors for its next generation of EVs, due in 2027-28, ending a collaboration with French supplier Valeo.

As Renault works to cut development time and costs, it is simultaneously focusing on cutting variable costs per car by €400. Translated across Renault Group’s 2025 sales of 2.34 million, that would represent nearly €1 billion in savings.

LFP batteries could be key lever to trim costs

One way to do that is to use less-expensive lithium iron phosphate batteries rather than nickel manganese cobalt ones, representing a potential savings of 20 percent for the most expensive component in an EV. Renault has already said it will launch an LFP battery option in the Megane E-Tech compact hatchback in an effort to boost sales. The Twingo, one of the cheapest European-made EVs at less than €20,000, has LFP batteries.

The bestselling Renault 5 electric small car, meanwhile, will continue to use NMC batteries, Provost said, as there is no need to “push” the car on buyers.

Other cost savings are coming from the Horse Powertrain, the joint venture with Geely that develops and builds internal-combustion engines in a global network of factories, CFO Duncan Minto said.

“We’ve got back to the point where it now costs Renault Group less to buy engines and powertrain units from Horse than it in the past, and that’s part of the €400 per unit variable cost reduction,” Minto said.

Asumendi of JP Morgan said that with its intense focus on cost cuts, Renault is well positioned to compete against Chinese brands.

Renault “will certainly face fierce competition in Europe from Chinese OEMs, but it has several tailwinds derived from a) recovery in [commercial van] volumes b) cost savings from its powertrain engine JV and c) disciplined fixed cost measures,” he wrote.