Luca de Meo blames Brussels for the demise of the small car

De Meo blames European regulation for the demise of the small car

In Torreperogil, Jabalquinto or Bailén, towns in Jaén where a new car is rarely seen, what does appear with a recent registration plate is Chinese: JAECOO, MG, Asian hybrids. Anyone traveling through the area sees it and sums it up without mincing words: European brands are committing hara-kiri. While that happens in depopulated Spain, Renault Group CEO Luca de Meo has once again fired at Brussels with what is now his trademark argument: European regulation has failed and has left the industry without the small car people can afford.

De Meo argues that “European regulation has failed over the last 20 years” and that now “the definitive solution” is being sought “with the electric-car story.” In his account, that regulation was driven by the Germans, interested in “more complex” cars because their market buys premium. The result, he says, is a “devastating effect” in producing countries such as France and Italy and, to a lesser extent, Spain, where people buy small cars “because they don’t have money or because they don’t fit in cities.” His recipe is in the headline: make them again.

Why cheap, simple cars are no longer made in Europe

The most repeated explanation does not point to marketing but to the rules. European anti-pollution regulations and mandatory electronic safety systems would have made it “impossible to build cheap, simple cars.” The example given is the small cars of forty years ago: a Renault 18, an Opel Corsa or a Peugeot 205 could do 120 km/h on a motorway with ridiculous fuel consumption and maintenance any plumber could handle. That simple, cheap car no longer exists and is in nobody’s plans. The thanks, ironic, go to Uropa.

On top of that regulatory wall comes commercial strategy. Dacia, the group’s low-cost brand, covered that gap until a few years ago. Today it is taken for granted that its range has been moving upmarket and is already expensive for many families. Anyone who wanted a new, affordable car was left, literally, with no box to tick.

How much does the new Renault 5 cost?

The new Renault 5 sells for 25,000 euros. It is not a 9,000-euro small car: it is a car with a battery, a screen and a list of equipment nobody asked for. And on EV prices, De Meo himself has been explicit: “the last thing I’m going to do is give up margins.” There lies the tension highlighted by the most critical responses. If the goal is a car people can buy, margin is exactly the variable that has to be touched. The rhetoric sits badly with the bottom line.

The underlying complaint goes back twenty years: European brands are accused of offshoring production, raising prices and pushing expensive financing, and now of asking for understanding when the market is slipping away from them. Nobody expects the solution to come from a press conference anymore.

How much does Luca de Meo earn as Renault CEO?

Luca de Meo’s base salary is 1.3 million euros a year. On top of that comes variable pay of up to 150% of the fixed amount, that is, 1.95 million, and a long-term compensation in Renault shares valued at around 2.6 million. In total, his annual pay can exceed 6 million euros if the share price remains stable. The contrast with the average worker who buys the car is, at the very least, uncomfortable for someone trying to champion the return of the popular small car.

The Chinese cars already being sold in Spanish villages

While Europe argues, the buyer resolves. There are those who, with an eight-year-old Japanese car in the garage, are clear that their next one will be a Chinese hybrid. The most repeated prediction is that in ten years the market will look like the phone market: Chinese brands and a few niche names for those who don’t want complications. In the towns of Jaén the picture is already set: JAECOO and MG by the bucketload. And it is not a matter of taste but of the fact that the average age of the vehicle fleet in those areas is around 15 or 20 years. (www.autopista.es)

The paradox of the vehicle fleet: 41-year-old cars passing the ITV

Faced with the new 25,000-euro car, resistance. There are vehicles that are 41 years old and pass the ITV (Spain’s roadworthiness test) without a problem, and owners who plan to keep their old diesel for as long as they can. Criticism of today’s car points to the same thing by another route: three-cylinder engines, ever taller bodies, electronic components that turn any breakdown into a bill for half a car. On homemade power upgrades, the warning is the usual one: engineers calculate to the limit, and anyone who tunes the engine without changing the turbo and intercooler ends up counting breakdowns instead of horsepower.

And so the guy who asks for a small, cheap, easy-to-repair economy car finds an offer that starts at 25,000 euros and goes up. The 41-year-old car still starts every morning.