Renault Considering R&D Outsourcing to Save EUR 200m Annually

/ May 11, 2020/ Akka, Alten, Altran, Automotive, Capgemini, Expleo (fomerly Assystem Technologies), France, Germany, News, Renault, Segula

Renault Wants to Work with Five ER&D Vendors

Renault is considering R&D outsourcing to save EUR 100-200m annually. The company currently works with approximately 15 ER&D vendors and wants to reduce its number of preferred partners to five. Currently, Renault’s most significant suppliers are Altran/Capgemini, Alten, Akka, Expleo, and Segula. Renault would award larger contracts that represent 80% of its ER&D spend to drive down prices.

The move would mirror the ER&D outsourcing policy of rival PSA. It is not a surprise, as Gilles Le Borgne, the former head of engineering at PSA is now head of R&D at Renault. Under Mr. Le Borgne, PSA outsourced parts of Opel’s R&D to Segula. The deal involved 800 engineers.

The French automotive OEM industry will go through significant changes in the next two years. Renault will announce by mid-May a EUR 2bn cost savings program, to which R&D outsourcing will contribute to 10-20%. With work at home now widely used, even among R&D departments, we think offshoring is the logical next step for Renault. Renault already has an engineering presence in Romania (for its Dacia brand) and in India (for addressing the local market).

The French Automotive OEM Industry Is Set for Significant R&D Outsourcing Changes

This is the beginning of the story for Renault: the company has other engineering priorities. Renault wants to increase the level of reuse and cooperation with allied firms Nissan and Mitsubishi. However, business relations are stranded. Engineering synergies with the two Japanese partners will take time, and Renault will favor short-term gains on its existing R&D.

The other French automotive OEM PSA will make significant moves in its R&D. It announced last week that its delivery policy by default for headquarter employees is to work at home. The company plans over time to have 80,000 staff spending, on average, 1.5 days in the office. This includes R&D engineers.

Finally, PSA is set to merge with FCA, which includes Fiat and Chrysler. While the merger favors FCA shareholders, PSA’s current CEO will manage the new group. We expect that PSA will roll out its existing best practices to FCA. The impact on R&D will be significant. More to come.

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