In February 2012, Renault’s chief operating officer Carlos Tavares told the French Senate’s economic commission in Paris that a Clio built at its plant in Flins, France, costs EUR1,300 more than the same car produced in Bursa, Turkey. Tavares was looking to emphasize the big difficulties that French carmakers Renault and PSA/Peugeot-Citroen face in competing against volume car manufacturers with lower labor costs like South Korean company Hyundai. The cost disparity is much painful at a time when there is an intensifying price war on small cars in Europe as carmakers employ profit-consuming incentives to maintain sales volumes. In 2011, Renault’s domestic plants accounted for around 42 percent of its overall deliveries in Europe. On the other hand, local rival PSA/Peugeot-Citroen has its domestic plants account for 64 percent of its overall sales in the continent.
Renault’s gradual shift of production to lower-wage economies has already become an issue with its largest shareholder, the French government, which holds a 15-percent stake in the carmaker. In 2010, reports that Clio’s production could be moved abroad have prompted former French President Nicolas Sarkozy to summon Renault chief executive Carlos Ghosn for an explanation. But this is economics and supply and demand of cars.
