Nissan In Talks Over Renault Merger

Nissan and Renault are in talks to merge and solidify their 20-year-old alliance under a single stock, according to reports. As electric vehicles and shared cars transform the market, a deal could be an indication of the unprecedented shift towards reliance on these two vehicle types. Talks suggest Nissan would acquire the majority of the French state’s 15% Renault holding, but this could lead to difficulties throughout the merger.

Political Sensitivity

As it stands, any deal between Nissan and Renault faces significant hurdles due to the political sensitivity in France. A key issue in this merger is Japan who are unlikely to agree to a tighter structure as part of the merger unless the French state reduces its stake.

The French Government is likely to be reluctant to relinquish its control, and any deal must balance both French and Japanese interests to avoid any appearance of a takeover.

Renault-Nissan spokespeople have stated that the alliance currently has “no plans to change the cross-shareholding ratio,” but other sources suggest that Renault are being advised by banks to produce a broader Renault-Nissan combination. Renault currently owns 43% of Nissan.

Importance Of The Merger

Having been an alliance for almost two decades, the two companies have saved approximately 5bn a year. This is expected to double by 2022. Research and development costs have also been reduced, with both companies sharing technology. An example of this is the identical technologies which underpin two of their key models: the Nissan Leaf and Renault Zoe electric cars.

Renault’s shares have climbed since the merger announcement, showing the potential for even more efficiencies.

Global Automotive Force

Renault is currently Europe’s third largest car maker, and Nissan is significantly larger on an international scale. Currently Renault owns 43% of Nissan, Nissan owns 15% of Renault, and Nissan also has a 34% stake in Mitsubishi.

A full merger would produce a major global force, offering significant competition against other industry leaders, including the likes of Toyota.

This month, reports suggest that Mitsubishi will further integrate with the existing Renault-Nissan alliance by joining a shared parts-purchasing organisation. This full alliance predicts unit sales of 14 million by 2022, compared with 10.6 million sold in 2017.

The Risks

While such mergers produce enthusiasm, they carry excessive risk and cultural differences can be a substantial difficulty in the Nissan-Renault merger. Synergies are often envisioned, but do not always materialise in these circumstances. A key example of this is the Daimler-Chrysler acquisition, which resulted in the owner selling up.

There is little confirmation from the Nissan-Renault alliance to support the talk claims. However, anonymous sources suggest that discussions are ongoing, and the talks could result in a combined company run by existing chairman Carlos Ghosn.

While an agreement is not yet visible, the future of Renault and Nissan will be an interesting one.

Renault Merger

Kristin Donahue writes about finance and business, looking for interesting topics to cover.