The faux spy scandal debacle couldn't have come at a worst time for the French carmaker, already struggling to regain its mojo on the hyper-competitive European auto market

It's been a long winter for Renault (Marc Lagneau)

It's tough these days to remember that Renault promised to refund 100 French customers the price of their new car. Or try to recall the carmaker's proud announcement last year that it would sponsor the French rugby team, which was destined for a disappointing performance in the Six Nations Tournament? Then there was Renault's excitement over a battery-exchange system in Denmark - with its partner Better Place - in order to start selling its 100% electric sedan there.

Ever since the resounding industrial-espionage-turned-hoax scandal erupted, the automaker's publicity engine has barely been audible, its broader strategy stalled. Before adopting a plan meant to redeem an image that many consider seriously tarnished, the company first has to assess the scope of the damage. The carmaker should start with the French market, since foreign media have been less active than their French counterparts in criticizing the company.

The myriad of market research studies ordered by Renault is likely to offer some insight on the question. The company has set for itself the goal of analyzing the latest mishaps by end of April or early May. But some of the studies are already giving a hint on what the possible effects might be. In the latest Ipsos Posternak barometer, which measures the image of the biggest French brands, Renault ranked 14th, far behind Peugeot (1st) and Citroën (2nd). More worrying for Renault, its "image index" fell by 16 points between October 2010 and February 2011.

Lately, Renault officials have been rather candid about the possible negative effects on the company's image of the wrongful dismissal of three of its executives in a widely publicized case in which they were falsely accused of spying for unidentified outside interest. Still, executives all draw a clear distinction between the "corporate side" and the cars, which seem to be largely unaffected by the popular discontent, according to a recent study conducted by another firm.

After all, during past thorny situations (such as the string of suicides several years ago at company headquarters, or Renault's decision to build the Clio 4 in Turkey and not in France), the same phenomenon was observed: Renault's brand image as a car manufacturer had indeed taken a blow, but the image of the cars themselves was left untainted, according to Stephen Norman, Renault's marketing director.

Image lost, sales down

From a broader perspective, the embarrassing espionage case came at the worst possible time, just as the company embarked on a long-haul mission to regain a solid brand image and address the "systemic problems' that made it lose its way in the past. "Between 1997 and 2003, Renault was the top European brand both in terms of volume and market share," according to a company marketing executive. "Then it slipped from first to fourth place, its image deteriorated and volume fell. In total, we lost 200,000 sales over the 2004-2008 period."

The success encountered by the low-cost Dacia line has somewhat masked these losses, but it hasn't prevented Renault from identifying the reasons. "Two thirds of the lost sales are due to our lack of competitiveness, for reasons which are mainly related to the design of our models. As for the remaining third, it's due to a lack of loyalty on the part of our customers, probably because of quality issues," the marketing manager adds.

Other sources confirm that the alleged espionage did not come out of the blue: "Renault's image was already ailing before the crisis," Opinion Way researchers say. "Citroen is far ahead of Renault from this point of view: the brand is considered to be more rewarding, and it succeeded in regaining the same solid image it had 20 or 30 years ago." Moreover, Renault seems to be stuck in design rut, with only a few models to be really proud of, and none that has created real buzz.

"In Germany, for example, people buy a Renault by default, simply because it is less expensive than others," according to Opinion Way. The disastrous handling of the espionage affair has thus simply added a new layer of troubles to a broader situation.

Well aware of its problems, the French carmaker has been preparing its comeback. One thing is for sure, its strategy will not be based on new discounts; according to Renault management, prices are not the problem. What the automaker really needs are "breakthrough models', like the current Mégane. Surveys have shown that 40% of people bought Méganes because of their design, while only 25% said the same thing about Renault's other models, according Renault's marketing chief Stephen Norman. He believes that all the carmaker needs to redeem its image is to launch one or two new such products, since the car's reliability has never really been called into question.

The only problem is that the next big date is scheduled for October 2012 at the Paris motor show, when Renault will introduce the new Clio and its electric cousin Zoe, with a 15,000-euro sticker price, battery not included. This means that the automaker has to wait another 18 months before it can show off a snazzy new model – and given the fierce competition between European carmakers, the waiting may be the hardest part of all.

Read the original article in French