LONDON -- Analysts praised Renault's "E5,000" Logan for developing markets, but warned that the French carmaker must work hard to profit from it.
The Logan will be built first at the Dacia plant near Bucharest, Romania. It is built on a platform shared by the Renault Clio and Nissan Micra. Renault hopes to make 700,000 Logans a year by 2010. Renault has commitments to also build the car in Iran, Russia, Colombia and Morocco and plans to eventually add production in China.
"Renault keeps saying they're going to make margins at or close to group levels," said Max Warburton, executive director of global investment research at Goldman Sachs in London. "They must be basing their assumptions on volume."
Renault is putting a lot of risk, management time and effort into a car "that will bring mobility to Eastern Europeans." he said.
Max Warburton on the Logan: "If you sell 700,000 a year for six years, you might just get there."
Analyst Nigel Griffiths of Global Insight
But margins will be very slim on a E5000 car, Warburton said. So making a profit could be difficult.
"If you assume they spent E1.2 billion on the car and the margin is only E300 per car, you're going to have to sell 4 million units over the life of the car to cover your fixed costs," he said. "If you sell 700,000 a year for six years, you might just get there."