PARIS -- Close to 10,000 people gathered near a Cistercian abbey north of Paris in June, not for a religious festival, but to celebrate a Romanian automaker named Dacia.
Eric Lanneau, a 57-year-old former plumber, attended the Renault brand’s annual picnic, which featured a performance by French pop star Jenifer. He bought a Dacia Duster in May, won over by the SUV’s design and affordability. “I had been a Ford customer for almost 30 years,” said Lanneau, who lives in a suburb of Paris.
The Duster was Europe's second best-selling small utility vehicle after the Renault Captur last year, according to Automotive News Europe's analysis of the segment.
Dacia has built a devoted following for its often spartan, low-cost vehicles, making it one of Renault's fastest-growing consumer brands. Yet the unit, which prides itself on its penny-pinching ethos, could now become a drag on Renault as it faces the costly hurdle of meeting the European Union’s toughening pollution standards.
Dacia’s 2018 lineup had more ground to make up before meeting the EU’s 2021 emissions targets than other brands, according to Evercore ISI estimates. Overhauling its models to meet the rules “could disproportionately hurt profitability,” even as Renault as a whole is better positioned than some rivals to meet the regulations, Philippe Houchois, an analyst at Jefferies in London, wrote in a note.
The new standards are among myriad challenges facing Renault, which is struggling to sustain its troubled alliance with Nissan while also grappling with a slump in European auto demand. Renault cut its forecast for 2019 revenue last month.
Starting in 2020, auto fleets will need to comply with new limits on carbon dioxide emissions, or face penalties. In one scenario laid out by Jefferies that assumes a continuing slowdown in auto sales, fines at Renault due to partial non-compliance could amount to 450 million euros ($504 million) -- or 17 percent of next year’s estimated profit.
The penalties will be based on emissions for all the cars made by Renault Group. On average, thanks to cleaner technologies, Renault brand cars emit less carbon dioxide than Dacias.