Dacia brand has become "cash cow" for parent Renault

Fri, 04 Jan 2013

No one, not even former Renault CEO Louis Schweitzer whose idea it was to buy Dacia in 1999, had any idea the low-cost Eastern European sub-brand would succeed this well. The Romanian automaker with three wheels in the ground at the time of its takeover was purchased the same year that Renault took its stake in Nissan, and no one had much to say about that smaller deal. Fast forward 13 years, the line that began with the Logan in 2004 is now five model lines on sale in 36 countries, it's year-on-year sales have never decreased and the vehicles built on its M0 entry-level platform sold nearly a million units in 2012. This isn't just an emerging-market story, either, with Dacia branded offerings making up 17 percent of Renault volume in Western Europe.

Its rampaging sales and the synergies between the Renault and Dacia lines have turned the brand into a "cash cow" in the words of Renault's COO. Its vehicles share a huge number of parts, many of which are still carryover nine years into the brand's life, and parts of the recently introduced second-generation Logan are evolved from the 1990 Renault Clio. In fact, due to amortization and decreased prices for parts because of the massive sales, the new Logan is less expensive to produce than the first generation, so it was given new equipment along with the refresh in order to maintain its price.

The news is even better in other regions, where the Dacia can command more money on its own or can be sold under the Renault or Nissan brands. The Duster in Western Europe that starts at 12,000 euros starts at 19,000 euros in Brazil. That's how Dacia, according to a Morgan Stanley analyst, returns a worldwide nine-percent operating margin as opposed to Renault's 0.4-percent. What lies ahead is more models and variants, as well as a modular strategy for the M0 platform to further reduce costs, and, one supposes, even more money from that Romanian cow.

By Jonathon Ramsey