Renault/Nissan: equal footing is the first step back to relevance


Cars can register as classics after 20 years. But creaky auto alliances, such as Renault’s with Nissan of Japan, are another matter. A two-decade relationship designed to foster trust, co-operation and prosperity instead grew rusty. Drastic measures led by Renault chief executive Luca de Meo were formalised on Monday.

Renault’s dominance will be reined in. Its stake in Nissan will fall to 15 per cent or equal to Nissan’s cross holding in Renault. This ends a rivalry where the smaller manufacturer was viewed as too powerful. The balance of Renault’s 43.4 per cent stake in the Japanese company will go into a French trust. Economic benefits are maintained, but voting rights are neutralised. No commitment for a sale has been made.

Markets had begun to price in an improved collaboration between Renault and Nissan, hoping for more on electric vehicles and growth in emerging markets. Even after outperforming the global sector by 85 per cent since the start of last year, Renault shares remain historically cheap in Europe at about 4 times 2023 earnings.

If doubts remain they rest with Renault’s plans for its electric vehicle unit Ampere. Nissan promises to buy into its upcoming IPO late this year. Perhaps one-fifth of the shares would be sold. This will split Renault into EV and internal combustion engine makers, a first for the industry. Ampere could be worth €10bn, thinks Jefferies. Bulls expect at least double that based on Tesla’s past success.

Most important is the road directly ahead. New, more profitable models from next year should help boost operating margins above 5 per cent by 2025. These peaked at 6.5 per cent in 2017. More important, free cash flow of more than €2bn from this year to 2025 should begin to accumulate, thinks Bernstein.

Renault and Nissan deserve credit for achieving a compromise. Yet this one does not immediately simplify the structure — it leaves an overhang for lots of Nissan shares. The listing of Ampere is the next test for Renault.


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