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PARIS  - Renault Chief Executive Luca de Meo warned of lingering headwinds in 2021 as a shortage of electronic chips added to uncertainties, after the COVID-19 pandemic dragged the French carmaker to an 8 billion euro loss last year.

De Meo, who took over in July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts, and there were early signs of improving momentum as margins inched up in the second half of 2020.

The group gave no financial guidance for this year, although it said it might reach a 2 billion euro cost-cutting target ahead of time, possibly by December.

It struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 amid enduring pandemic restrictions in some countries.

Renault is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world's fourth-biggest automaker.

Carmakers all endured a tough 2020 but a rebound in premium car sales in China towards the end of the year helped companies such as Volkswagen and Daimler to weather the storm.

"The beginning of the year has shown some signs of weakness," De Meo told analysts, adding he hoped for a "positive surprise" in the second half, by which time the chip shortage should have eased.

"2021 should be another difficult year, but we have taken the necessary measures to anticipate and overcome challenges," he said.

Renault estimated the component problems could affect its production by about 100,000 vehicles this year.

The group was already loss-making in 2019, to the tune of 141 million euros, and it took a sharp hit in 2020 as output faltered and dealerships closed during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.

Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020, after the bulk of the hit was recorded in the first half.

The group posted negative free cash flow for 2020, and said it was partly hit after its banking unit RCI was unable to pay a dividend due to European Central Bank guidelines to cope with the COVID-19 crisis.

That situation should ease in 2021, and deputy CEO Clotilde Delbos said free cash flow should turn positive again.

Shares were down sharply in early trading, falling 5.3%.

IMPROVING PRICES

Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros, or 3.5% of revenue.

Analysts at Jefferies said the operating performance was better than expected.

Sales were still falling in the second half, but less sharply.

Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development too, as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.

It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.

($1 = 0.8269 euros)

(Reporting by Gilles Guillaume and Sarah White; Editing by Christopher Cushing and David Evans)