Declining demand for electric vehicles (EVs), increased competition from China and market volatility are complicating French carmaker Renault’s plans to float its Ampere unit.

Renault is keen to extract more value from Ampere through an initial public offering (IPO) but is unlikely to go ahead if the final valuation is below €7bn, according to two agency interlocutors. One said the cut-off point could be closer to €6bn ($6.33bn).

Even at those valuations, they said, the IPO, scheduled for next spring and originally prepared for the second half of 2023, would be hampered by market conditions.

Several European companies, including DKV Mobility, German gearbox supplier Renk and France’s Planisware, have recently abandoned plans to go public, citing market conditions, while automakers including Tesla have warned of a slowdown in electric vehicle production.

Some analysts have already questioned Renault’s estimated share valuation of up to €10bn, with some suggesting the carmaker could use alternative options to raise cash.

The IPO is part of a radical reorganisation plan devised by Renault CEO Luca de Meo. It includes spinning off Renault’s engine business into partnerships with China’s Geely and Saudi Arabia’s Aramco, as well as reorganising the alliance with Nissan.

One European fund manager, speaking on condition of anonymity, said that in a difficult market environment for an IPO, Renault may have to agree to whatever valuation investors are willing to offer for Ampere.

Renault, which will make an IPO presentation to investors on 15 November, said there could be short-term pressure on the market, but noted that electric vehicle market share in Europe has increased to 20 per cent in 2023 from 15 per cent in 2022, and that independent research estimates average annual revenue growth in the sector will be 20 per cent or more by 2030.

Ampere is the only EV player in Europe and “deserves to trade at multiples closer to peers due to its exponential, low-risk growth.”

European carmakers and policymakers have also expressed concern about an “influx” of cheap electric cars from China, prompting the European Commission to consider imposing tariffs on imports.

De Meo said in September that Ampere could be valued at between €8 billion and €10 billion as a result of the listing, above the French carmaker’s current market capitalisation of €9.55 billion.

Analysts at UBS said on 31 August that Ampere was worth just €3-4 billion, warning that Renault was one of the groups most exposed to Chinese rivals in Europe.

Barclays analysts recently estimated Ampere’s value at €5bn, and last week Bernstein analysts wrote an open letter to de Meo advising him to abandon the IPO and consider selling Renault’s 28 per cent stake in Nissan to raise cash.

Renault said in a statement that the UBS and Barclays valuations were the lowest published so far and that the analysts did not have all the key metrics to assess the company’s value.

Despite market conditions, Renault is still firmly committed to an IPO of around 20 per cent of Ampere’s share capital, according to one of its interlocutors and a third.

To this will be added about 10 per cent of shares, which will go to Renault’s allies Nissan and Mitsubishi, which have pledged to invest up to 800 million euros in Ampere.

The IPO and the sale of Nissan and Mitsubishi shares will result in Renault owning between 60 per cent and 70 per cent of Ampere, the sources said, but warned that these figures could change.

The market value of other electric car makers has fallen sharply in recent months. Polestar was worth around $20bn last year and is now worth $4bn, while Elon Musk’s Tesla shares have lost almost a quarter of their value in less than two months.

The Ampere IPO will consist of Renault shares and new shares and could take place as early as April 2024, depending on market conditions, one of the sources said.