By joining forces with the French car manufacturer Renault (RNSDF) , japanese carmaker Nissan (NSANF) has made a marriage of convenience. Interests have taken precedence over a real desire to partner with a company in which the French government, known for interventionism in the daily life of the companies in which it is a shareholder, has an important stake.
But, as in a marriage of convenience, it's not the heart that matters but what you get out of it. Consequently, Nissan closed its eyes on this point which will come back to sting it later.
Among the fundamentals that structure the Alliance founded in 1999, the geographical distribution between the two partners is crucial. While the Japanese group monopolizes North America, Japan and Asia, the French manufacturer is in control in North Africa, Latin America, India, in Europe, a geographical area that includes Russia.The Russian market with an annual production of 500,000 cars is the French manufacturer's second largest market after France. It largely contributed to balancing Renault's weight in the Alliance.
Renault and Nissan at an Imbalance
This may no longer be the case in the future and thus aggravate the gap that is widening between the two iconic brands.
We must not forget that when the Alliance was created, Renault and Nissan weighed the same in terms of volume, but in more than 20 years things have changed a lot. Today, it is clearly Nissan that has taken over with more than 4 million cars against 3 million for Renault in 2021.
Indeed, the Russian invasion of Ukraine on February 24 has completely changed the situation and increased the imbalance between the two partners. By taking economic sanctions against Moscow, NATO forced the multinationals to take anti-Russian measures by suspending their activities in Russia and leaving the country. After resisting for a long time, Renault finally announced its departure from the country. This decision has important consequences for the Alliance with Nissan.
With the withdrawal of Russia, the gap will mathematically widen. Especially since we must add for Nissan the 1.2 million cars from Mitsubishi Motors (MMTOF) , now managed by the Japanese brand. All in all, Nissan, therefore, represents almost twice the total weight of Renault, a household name in France.
The possible loss of Russia falls particularly badly in terms of timing for Renault, which is in the process of completely reviewing its range but also its strategy with its 'Renaulution' plan. Quite the opposite of Nissan, which is doing particularly well thanks to the rebound in its main markets (United States, China, Japan). Moreover, at nearly 18 billion euros, the market capitalization of Nissan weighs almost three times that of Renault.
A History of Tensions Between Renault and Nissan
Nissan seems to want to take advantage of this. Executives from the manufacturer of the Altima sedan and the Rogue and Pathfinder SUVs and those from Renault plan to meet next month in Japan, according to multiple reports. This first in-person meeting between the leaders of the two companies since the pandemic is crucial.
Among the topics on the table are Renault's plans to separate its gasoline and diesel vehicle production operations from electric vehicle manufacturing and assembly operations. But there is no doubt that the discussions will mainly focus on the financial consequences of Renault's departure from Russia.
The French group arrives weakened in these discussions. Renault warned last month that it was going to book a non-cash charge of 2.2 billion euros ($2.4 billion) linked to its departure from Russia. The company's share price has fallen by more than 25,1% since the start of the Russian invasion. This decline raises many questions about the stability of the company and its ability to finance new projects.
If there is currently no signal of imminent structural changes in this alliance, which also includes Mitsubishi Motors Corp, it is hard to imagine that things are going to remain still. In view of the leaders who should participate in this meeting, we can expect that there will be announcements afterwards. On Renault's side, Luca de Meo, the new CEO, will be present, while Ashwani Gupta, Nissan's chief operating officer, will represent Nissan.
"Renault executives are planning to visit Japan for the regular monthly meeting of the Alliance," a Nissan Spokesperson told TheStreet.
Renault didn't respond to a request for comment.
The Renault-Nissan Alliance regularly sparks rumors about possible changes in cross-shareholdings. Renault owns 43% of Nissan while the Japanese group only owns 15% of Renault.
The arrest in November 2018 of Carlos Ghosn, in Japan, for financial embezzlement which he denies, revived the tensions that have existed for a long time. It almost destroyed the Alliance. The two companies have resisted bringing their technical and engineering teams together for example.
