Nissan is about to make an investment in Renault’s electric vehicle (EV) business that might range from $500 million to $750 million. So what if it loses $687 million as it sells its Russian operations to a state-owned company for one euro? The manufacturer promises to stick to its earnings projection for the fiscal year that ends in March 2023.
The demand for transportation electrification has upended the whole auto industry at the same time as these intertwining Nissan stories. The Russian offensive against Ukraine complicates Nissan’s already challenging and evolving economic influences. After the highly denounced invasion on February 24 of this year, over 1,000 enterprises already ceased operations in Russia and departed the country.
The majority of the media attention has, however, been on Nissan’s efforts to stabilize its business operations through a new partnership with Renault. According to sources, executives from Nissan and Renault met this week to discuss an EV takeover, shareholdings, and other issues.
The last weekend was largely spent by Nissan CEO Makoto Uchida and COO Ashwani Gupta with Renault CEO Luca de Meo and Senior Vice President of International Development and Partnerships Francois Provost. The Suzuka Formula 1 Japanese Grand Prix was plagued by a horrible storm that caused numerous red flags, safety cars, and an extremely dull race. The four executives had plenty of time to talk while they waited for restarting due to the severe weather.
Monday at the Nissan corporate offices in Yokohama, their deliberations resumed.
THE ALLIANCE’S PUBLIC FACE On October 10, Renault Group and Nissan Motor Co. issued a curt joint statement from Paris, Tokyo, and Yokohama amid rife speculations. The Alliance claimed that as part of ongoing efforts to strengthen the alliance’s collaboration and its future, they are now having frank discussions about a number of initiatives.
The topics discussed include:
a deal on a number of important joint endeavors spanning various markets, goods, and technology A key step towards Nissan Ambition 2030 is Nissan’s contemplation of investing in the new Renault EV business, which will help Renault’s Renaulution goal. To guarantee sustainable Alliance operations and governance, the companies continue to push for structural reforms. The brief statement concluded with the remark that the Alliance members would communicate further as needed.
BEHIND-THE-SCENES NEGOTIATIONS BETWEEN NISSAN AND RENAULT What is known as follows.
The newly established Alliance: Nissan Motor and Mitsubishi Motors have been approached by Renault to invest in a new EV project. Renault CEO Luca de Meo is developing the reimagined business model. Key elements of the negotiations will be on Renault maintaining a minority ownership in the legacy business and a potential initial public offering as they outline how such an EV investment will effect their Alliance. The intentions of the company would also need to be approved by the French government, which owns 15% of Renault.
Introduction of Renault to the EV market: As part of a new growth strategy, Renault intends to spin off its EV business into a distinct company. In an earlier statement, Renault stated that by 2023, the EV facility would be in France and employ roughly 10,000 people.
Nissan’s ownership of Renault is 15%, although it has no voting rights. Nissan might become more competitive as a result of the new arrangement.
Overall financial situation of Nissan: Last year, Nissan unveiled a strategy to target 50% electrification by 2030 while investing 2 trillion yen ($13.8 billion) over a 5-year period. For the first time since Carlos Ghosn, Nissan’s previous CEO, was fired four years prior, sales increased in the quarter ending March 2022. (and jailed in Japan). Totals for June 2022 came to around $10 billion in cash . According to Morningstar , free cash flow will become positive at around 388 billion yen ($2.7 billion) by 2024.
I want to see the money. The June Nissan cash and equivalents allowed the corporation plenty of room to buyback some of its stock and invest in the EV business of Renault. Nissan’s profitability and sales have surpassed expectations, and the firm will probably upgrade its prognosis when it releases its quarterly results in the first part of November.
Why can’t we simply all get along? A new operating agreement between the companies will be necessary due to the modifications. It would be fascinating to see how that plays out since Carlos Ghosn, who was brought in by Renault to save Nissan in 1999 and who later rose to the position of CEO of both manufacturers and chairman of their alliance, will be involved. Later, he expanded the agreement to include Mitsubishi Motors, but he was detained in 2018 on suspicion of underreporting his income. In December 2019 in a guitar case , he managed to flee Japan, and he is now in Lebanon.
Nissan views Renault’s present reorganization as an opportunity to reevaluate their relationship, which dates back decades and has frequently been tense and jealous. This is how Nissan thinks about the Alliance’s progress. Nissan sees its impending partnership with Renault as a software and advanced EVs venture.
Nissan has previously asked Renault to examine its ownership stake in Nissan, and now Renault is selling its Nissan shares. The agreement is conditioned on Renault reducing its ownership of Nissan from its current 43% to 15%. When the agreement takes effect, Renault’s vote rights will likewise be immediately limited.
Renault will benefit from the new arrangement because it needs money to carry out its battery-powered aspirations. The value of the block of shares to be reserved is now at $4 billion. As one of the Alliance’s members, Mitsubishi Motors, has already announced plans to exchange technology in an effort to spread the cost of electrification, Renault’s EV aspirations may help offset some expenses.
In what time frame will the shares be sold? With the option to put shares in a trust and grant Nissan the right of first refusal for any stock that is offered for sale, Renault will gradually sell its ownership in Nissan. Any contract will have clauses barring Renault from selling shares to other companies or activist investors.
Is it solely EV at all times? No. It appears that the factory will also research and produce combustion and hybrid powertrains in addition to EVs. Nissan’s unique strategy, which continues to place a strong focus on hybrid motors, actually restricts the opportunities for collaboration (an internal combustion engine with a battery electric capacity). The Alliance’s ambitions for electrification do not currently include Nissan’s E-power hybrid technology.
Exist any potential obstacles to this newly created Alliance? Nissan’s unwillingness to let Renault to transmit combustion powertrain technology to Aurobay, a joint venture between Volvo Cars and China’s Zhejiang Geely Holding Group and other investors, could prove to be a stumbling block in the negotiations. Obtaining approval from the Japanese government and Dongfeng Motor Group, Nissan’s longtime partner in China, are two more obstacles for the combustion-powertrain agreement.
An unnamed source revealed internal Alliance dialogues in Auto News Europe , providing insight into the Alliance’s history. Reuters added further information.
Do you value the unique reporting and cleantech news coverage on CleanTechnica? Consider becoming an Patreon patron or a CleanTechnica member, supporter, technician, or ambassador. Don’t miss a cleantech story, will ya? Register for daily news updates from CleanTechnica by email. Or follow us on Google News Want to advertise with CleanTechnica, send us a tip, or propose a speaker for our podcast CleanTech Talk? You can reach us here.
