(Updates throughout with quotes, adds byline)
By Michael Ellis
MAKUHARI, Japan, Oct 23 (Reuters) - Renault SA Chairman Louis Schweitzer said on Thursday that he expects the revamped Megane car range will push up the French auto maker's operating profit margins in 2004 above 4 percent, from a target of 3.5 to 4 percent this year.
"We look for an operating margin in 2004 above 4 percent," Schweitzer told reporters at the Tokyo Motor Show.
The weak French economy and auto sales will rebound slightly next year, he said, but at a slower rate than other parts of Europe, which should leave Renault's share of the Western European market unchanged.
"Next year, hopefully (French vehicle sales) will increase by one to two percent," from a forecast drop of about seven percent this year, he said. "We do not see a strong rebound in the French market."
French new car buyers are moving to smaller, typically less profitable vehicles, he said, which puts pressure on the auto industry to cut costs. "This I do not see changing immediately, which means that pressure on costs does remain significant," he said.
Boosting sales incentives such as rebates on small cars would be a mistake, he said.
"If we went in a fairly aggressive rebate war to increase our market share in France, we would probably be shooting our own feet," he said.
Next year, growth in auto sales in Renault's home market of France could lag the rest of Western Europe, which could make it tough to boost the company's market share from around 10.7 percent this year, he said.
Schweitzer repeated that Renault will reveal next spring its strategy for entering the booming car market in China, which this year will top Europe's largest market, Germany, in new vehicle sales. He said it was wise to wait and see how the market develops.
"We will never be number one in China, there are already a number of players. I believe it makes more sense to be careful and to look at how we can make the best inroads," he said. "I would be greatly surprised if we were not part of the Chinese market."