Make Use of More Equal Footing as Opportunity for Growth

Nissan Motor Co. and France’s Renault Group have agreed to change their unequal capital relationship. As the industry enters a period of change, the question is whether the restructuring of the relationship can lead to growth.

Nissan and Renault announced that Renault’s stake in Nissan will be reduced from 43.4% to 15%, equal to Nissan’s percentage stake in Renault, putting both partners on equal footing.

Renault will transfer 28.4% of its stake in Nissan to a trust at a French financial institution and will not exercise its voting rights in principle. These shares then will be sold in stages.

“Equal partnership is an enabler of transformation,” Nissan President Makoto Uchida said at a press conference.

The unequal capital relationship between the two companies has been a cause of troubles in the alliance, and it is a welcoming move that this is being eliminated.

When Nissan was in a financial crisis due to poor sales following the bursting of Japan’s bubble economy, the automaker came under Renault’s umbrella in 1999, with Renault investing about ¥600 billion in Nissan. Under the leadership of Carlos Ghosn from Renault, Nissan implemented restructuring measures, including plant closures, and successfully rebuilt its business.

However, while Nissan’s sales and the number of vehicles sold began to greatly exceed those of Renault as its business performance recovered, dissatisfaction had grown within Nissan over the “twisted” relation between business performance and capital relationship with Renault.

The French government, Renault’s largest shareholder, had sought the merger of Renault and Nissan, but Nissan strongly opposed to the move. The realization of having the two sides on equal footing can be said to be a long-held desire of Nissan.

The circumstances behind the agreement also stem from the situation Renault has been facing. The automaker, whose main market is Europe, was forced due to the Ukraine crisis to withdraw from Russia, which had accounted for about 20% of its global sales.

In Europe, the shift to electric vehicles is progressing, a move that requires large development costs. A new EV company to be established by Renault will receive an investment of up to 15% from Nissan. Renault must have judged that it needs to make concessions to Nissan in order to put more energy into the EV business.

Meanwhile, many challenges remain for Nissan even after the capital relationship with Renault is changed.

Global sales of the three-company alliance that includes Mitsubishi Motors Corp. exceeded 10 million units in 2017, ranking second in the world, but fell to 6.15 million units in 2022, partly due to the management disruption caused by the arrest of former Chairman Ghosn.

In the field of EVs, Nissan was ahead of the pack with the introduction of the Leaf in the mass market in 2010. But it has since been overtaken by startups such as Tesla Inc. of the United States and BYD of China, and now has only a weak presence in the market.

In order to maintain the superiority of the Japanese auto industry, the strategy of the three-company alliance must be rethought to achieve technological innovation and strengthen competitiveness.

(From The Yomiuri Shimbun, Feb. 8, 2023)