Dispatches do Brasil: Renault Re-Invents Itself in Latin America

Renault Logan

Among the first to come to Brazil when the market was opened up again in the 1990s – after a hiatus of almost 50 years when this country closed itself off to the world – Renault has seemingly reached a limit in Brazil. Its market participation has hovered around 6 percent for years. Now, hungry for more, the French company is showing its new plans that will deeply affect their operations in Latin America at large and shake up their manufacturing base in South America, most especially Mercosur (namely Brazil and Argentina).

When their Ayrton Senna factory was opened in São José dos Pinhais in Paraná state, their line was in tune to what they produced in Europe. They offered the Clio, Kangoo, Mégane and Scénic. With an emphasis on safety, even the lowly Clio offered dual frontal airbags. At that time, the relative parity between the Brazilian real and American dollar allowed them to import systems such as the aforementioned airbags on the cheap. The minivan Scénic offered space for five, a large trunk, modular seating and became a favorite for families. The Mégane and Kangoo meanwhile suffered at the hands of more established competition and never made a dent in Volkswagen Golf, Fiat Stilo or Ford Focus sales. The Fiat Doblò passenger and commercial versions plus the Uno-based Fiat Fiorino conspired to keep the Kangoo down.

In the Brazilian market, reception was mixed. At the entry level, the Clio had lukewarm success. The majority of compact level car buyers are not exactly flush with money, so buying a new entry into that market was seen as a risky proposition. The Scénic and other minivans slowly, but surely, decimated the station wagons then available on the market. Together with Citroën minivans, Renault owned that market. As it became a favorite, the prices of this type of car rose above the rest of the competition and became expensive to buy.

Undeniably, Renault and other French makes suffered a perception problem. While most think their engines are robust and can take the pressure, suspension systems were and remain under suspicion in the eyes of Brazilian consumers. So, despite placing rather high in consumer satisfaction surveys, Renaults take a hit at re-sale time.

Brazilian Clio

Over the years the American dollar and euro appreciated against the Brazilian real and growing sales plateaued. Renault's reaction was to cheapen their offerings. Soon, the Clio lost its airbags, losing its appeal to the better off buyers that seemed to favor it over the VW Gol or Fiat Uno. When it was re-designed, it kept the previous car's internal design. A new Scénic was launched in Europe, but citing cost complications, Renault chose to keep building the old one. Renault also tried to gain market penetration by locally building and selling a Mégane sedan and station wagon. Inevitably, Renault's line became outmoded and nothing on offer in Europe was sold here.

Of course, errors in reading the market collaborated to their downfall. In the early 2000s, Renault was challenging Ford for fourth place in the Brazilian market. Ford reacted by launching the EcoSport and new Fiesta, new engines, and soon saw the distance between it and Renault grow. Besides the cheapening and non-updating of the line, beginner errors abounded. In Brazil, the Scénic was a solid middle class car, even higher middle class, and not the cheap and cheerful family transportation pod it was in Europe. As such, Brazilian dealers clamored for black and silver Scénics while the French continued offering it in purple, red and other colors the middle class rejected. The Clio, besides keeping the same interiors forever, never changed wheel cover designs or had new versions launched (tricks in which the traditional Brazilian Big Four – Fiat, GM, Volkswagen and Ford – are experts).

In the late 2000s, Renault re-made itself in Brazil. The Scénic was gone. The Kangoo was now only a commercial vehicle. The Clio soldiered on unmolested and seemingly only existed so Renault could keep a foot in the entry-level market. A solution was found though and it was the result of the deepening of the synergies and integration within the scope of the global Renault-Nissan Alliance.

Renault underwent the so-called "Dacia-lization" (Dacia being a Romanian company that Renault uses as its low-cost brand in Europe). The Logan, Sandero and eventually the Duster were launched. In spite of the insipid design, the cars used a Renault-Dacia version of a modern Nissan platform. The Logan family's claim to fame and a space in the market was that it offered a lot of space for modest prices. Size-wise similar to Focus and Toyota Corolla type cars (sometimes even bigger, trunks tended to be larger), but priced similarly to smaller cars like Gol or Fiat Siena, they appealed to a more rational buyer. After a few years, with the launch of the Duster CUV, Renault was again encroaching on Ford and distancing itself from the Asian brands that were finally "acclimatizing" (by offering compact cars similar to market favorites) to Brazil and had been threatening Renault's (by then traditional) fifth place in Brazilian sales rankings.

Nov-Ford-Ka-SEL-2015 (3)

As the 2000s became the 2010s, Renault was again under assault. Competition grew. Everybody copied their idea of a larger cars for more modest prices. Fiat launched a bigger Palio and a Grand Siena. Volkswagen do Brasil got into the compact sedan market again with its Voyage. Ford brought the new Fiesta and conjured up the highly competitive new Ka. GM came strong based off of its GM Korea know-how and re-invented themselves in Brazil, becoming the leader of in-car mobile electronics. Toyota got serious in Brazil and the Etios family has been gaining ground, horrible design notwithstanding, based on modern mechanics and a good ride. Hyundai's HB20 has done the opposite: it has conquered image conscious consumers due to the success of it fluidic design language, in spite of the bad ride. All these companies and cars offered up new technologies and engines, bringing more fuel economy to buyers, extra gadgets and crept up on the Logan family's cost benefit advantage.

Reacting, Renault has launched a re-designed Logan and Sandero. Though the new designs have been well-accepted and increased sales, this growth has been deemed insufficient. Both Hyundai and Toyota routinely sell more than Renault on a monthly basis and could soon take fifth place in overall sales. As such, Renault studied its South American operations and has cooked up a plan.

Renault Oroch Concept

An "un-Dacia-lization" of sorts seems to be in place. Logan and Sandero production is being moved to Argentina. The company is investing heavily in their ancient Santa Isabela factory in that country. Duster production will be kept in Brazil and soon the Oroch pickup (based on the Duster and rumored to be a 1 ton pickup) will be launched. From what the press has been able to piece together, both Duster and Moroch will be produced off of the current platform and updates will be infrequent, following the age-old strategy of competing on price and, also, space. The Duster is larger than EcoSport and the recently launched Jeep Renegade, Honda HR-V and Peugeot 2008. The Moroch will dwarf the current Fiat Strada (new, larger version of which has been seen tooling around the factory), VW Saveiro and the old-as-the-hills, barely competitive Chevrolet Montana.

The Moroch however is an indication of the deepening of the CUV event horizon presciently seen by our recently departed Derek Kreindler. Renault is going all-CUV-in. The Renault Captur, a current Clio-based mini CUV is a foregone conclusion. Renault is not even hiding it anymore and it has been seen around the factory in Paraná and on highway tests. This lends credence to the thesis Renault is re-inventing itself. The new Brazilian Clio, the same again as the Euro Clio, should also appear soon, albeit placed in a category above the current Brazilian Clio's status. Suppliers also say Renault is quoting prices for a sedan version of the Clio (non-existent in Europe) and indicative of the soon to come demise of its midsize sedan offering, the Fluence. Informed journalists in Brazil have stated that the Espace, Renault's large (and former) minivan, which has turned into a sort of a CUV, is slated to be introduced in Brazil in 2016 as a locally-produced offering.

The current Brazilian Clio is also on its last days. Though reports are conflicting, either a version of Nissan's own low-cost brand Datsun Go will be built here in Brazil, or a version of the concept recently shown in world Auto Shows by Nissan called the Sway (supposedly an early version of a substitute for the March/Micra line), could gain a Renault badge and come strong in the lower echelons of the Brazilian market.

Meanwhile, in Argentina, besides the heavy modernizing investments at the local plant and the responsibility of building the Logan family, current cars will remain in production. And very interestingly, the new Frontier/Navara pickup that will used by Mercedes Benz to offer its own global midsize pickup (compact PU for Americans) will also gain a Renault badge for sale, initially, all over Latin America. Internally called the Raptur, this will be Renault's first incursion into the traditional midsize pickup market. It is an important step and will allow Renault to compete in an important market spanning the entirety of Latin America. Coming soon (reports say early 2016) you could soon take your pick and buy your midsize pickup in your preferred flavor – Nissan, Mercedes or Renault – as they will all be built side-by-side at the Argentinian factory.

The next few years will be very important for Renault in Latin America. It will keep and modernize entry-level cars. It will continue offering competitively priced compact cars that offer a bit more and are the bulk of the Brazilian market. It will make new tries, with new product, to gain a presence in upper middle-class garages by "Euro-pizing" its Brazilian production. It will sell CUVs for all pockets. Pickups, small and large will further broaden Renault's Latin American presence.

If this will be enough to keep Toyota and Hyundai at bay remains to be seen. However, it seems if they will be offering cars, CUVs and trucks, the market wants. Sounds like a plan.