Renault shares rose on Tuesday following the surprise announcement of the cancellation of the initial public offering (IPO) of the group's electrical and software nugget, Ampère, with the stock market hailing the abandonment of a project that had become risky in an uncertain market context for electric vehicles.

On the Paris Bourse at around 09:00 GMT, Renault shares gained 0.67% to 34.53 euros, having climbed to over 5%, compared with a 0.25% gain for the CAC 40.

Renault had announced the previous evening that it had decided to cancel Ampère's IPO, planned for the first half of the year, as soon as possible, on the grounds that market conditions had not been met and because it had sufficient cash to finance the activity from its own resources.

"Even if this announcement can be seen as negative for Renault insofar as it will raise legitimate questions about its electric vehicle strategy and momentum, it should not come as a complete surprise," write Berenberg analysts in a note.

"This is due to the increasingly difficult electric vehicle market, with strong price and product competition, fading momentum in growth and demand for electric vehicles, and widespread uncertainties around subsidies (...) which are not helping to fuel investor appetite for 'pure player' electric activities."

Last autumn, several analysts had questioned Renault's ability to obtain the valuation of up to ten billion euros for Ampère. At the time, Renault CEO Luca de Meo repeatedly replied that the objective was still an IPO, but not at any price.

A pioneer in electric vehicles with Nissan in the previous decade, Renault has since been supplanted by newcomers such as Tesla, a pure player in battery-powered vehicles, and Chinese brands.

The creation of Ampère last autumn should help the Group to get back into the race by giving its electric and software activities a higher profile than its historic assets in internal combustion engines.

"An organic solution avoids distracting management at a critical time for the industry", says Jefferies, for whom the current valuations of electric pure players make an IPO unattractive.

"We were skeptical early on about this potential IPO and view the decision as positive, but understand that the timing of the move may leave many industry observers perplexed", writes Kepler.

At the Geneva Motor Show in late February, Renault will present its new Renault 5, an electric model at the heart of Ampère's strategy and crucial to the revival of the group's battery car sales, as well as another flagship project, the new electric Twingo. (Gilles Guillaume and Claude Chendjou, edited by Kate Entringer and Blandine Hénault)