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The Electric-Vehicle Company That Charged Too Early


In the U.S., Tesla has sold more electric vehicles than any other car maker. In the much larger European EV market, that prize still goes to the Renault-Nissan-Mitsubishi alliance, but

Volkswagen


VOW 1.99%

outsold it last year and Tesla is closing in.

The failure of Renault and Nissan (Mitsubishi joined the team later) to parlay their early lead in plug-in cars like the Nissan Leaf into strong growth prospects looks like one of the great missed opportunities of automotive history.

On Thursday, Renault followed Nissan in laying out a “new beginning” after a rocky few years. The company has some lingering advantages in EVs, but its turnaround is more reliant on old-fashioned virtues such as cost control and selling larger cars.

Chief executive

Luca de Meo,

a marketing man who joined Renault last year from Volkswagen, wants to turn the page on the relentless pursuit of sales and scale encouraged by his predecessor

Carlos Ghosn.

Costs climbed and returns plummeted as Mr. Ghosn pushed small cars into far-flung emerging markets. Just like Nissan in the U.S., Renault now has to find savings at the same time as coming up with more attractive products that can fetch higher prices.

It will take time. Until 2023, the company’s main focus will be on margins and cash, and even for that year, it is targeting a minimum operating margin of just 3%.

Investors weren’t wowed by Thursday’s announcement, and the shares fell more than 3% at the open. They bounced back after Mr. de Meo and his team stressed that they hoped to do better than that 3% margin. Cash flows should also recover faster than operating margins, which are burdened by the depreciation of assets accumulated during the years of laxity.

An optimistic reading of Renault’s situation is that it is where local peer

Peugeot

was in 2014. Peugeot CEO Carlos Tavares rebuilt profits spectacularly by selling larger vehicles at better prices, just as Mr. de Meo hopes to. Mr. Tavares also likes setting low margin targets and then beating them.

There are differences too. To extract cost savings, Peugeot relied on mergers, with the European business of

General Motors

in 2015 and now through the

Fiat Chrysler

deal due to close Saturday. Renault’s alliance with Nissan and Mitsubishi promises savings too, but has never delivered anything like the kind available through a full merger. Meanwhile, it stops the companies engaging in more productive tie-ups, as Renault’s own efforts to combine with Fiat Chrysler in 2019 showed.

For those patient enough to sit out a long and bumpy journey, there is value in Renault at today’s stock price, which is less than half its level five years ago. Old-fashioned auto stocks typically follow profits, and Renault’s have room to grow after the massive losses expected for 2020. For better or worse, this turnaround story is a world away from the startups currently transfixing Wall Street, with the EV technology Renault and Nissan once pioneered.

Write to Stephen Wilmot at stephen.wilmot@wsj.com

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