Renault and Nissan To Come to a Favorable Agreement, Nissan To Invest in Renault EV Division

By: Asia Business Outlook Team | Monday, 30 January 2023

Nissan Motor and Renault agreed to a major overhaul of their two-decade-old automaking alliance, putting them on equal footing and allowing Nissan to invest in Renault's new electric vehicle business.

The announcement came after nearly four months of intense talks, which sources said were complicated by concerns about intellectual property sharing as Renault sought to form a number of new alliances with companies outside their alliance.

According to Renault, the deal, which is still subject to board approval, will reduce Renault's stake in Nissan to 15% from around 43%, transferring around 28% of the Japanese automaker to a French trust.

Most importantly, this will make the companies more equal partners. Nissan executives had long been frustrated by their unequal relationship. Renault, which bailed out Nissan two decades ago, is a much smaller automaker in terms of sales.

Their alliance, which includes Mitsubishi Motors as a junior partner, has been severely strained by the ouster of its architect, former Chairman Carlos Ghosn, amid a financial scandal.

Nissan will now be able to exercise its voting rights, which it was unable to do previously, thanks to the pair's 15% cross-shareholding.

The cross-shareholding agreement includes a lock-up provision that prevents shareholders from selling their stock for a set period of time, as well as a standstill obligation that restricts how a shareholder can buy or sell stock.

Renault intends to instruct the French trustee to sell the Nissan shares, valued at approximately US$4.1 billion at current market prices, in a coordinated and orderly manner if commercially reasonable for Renault.

Since the two automakers announced they were in talks to restructure their alliance in early October, Renault shares have risen nearly 25%, while Nissan shares, which face a potential stock overhang, have risen only 3%.

Nissan and Renault have agreed to invest more resources in key projects in Latin America, India, and Europe involving markets, vehicles, and technologies as part of the agreement. Nissan also announced plans to invest in Renault's new battery-electric vehicle division.

The shape of the Franco-Japanese alliance in the future has implications for both companies as well as the global auto industry. It also emphasises how the auto industry's massive technological upheaval is forcing companies to collaborate and compete with an increasing number of newcomers and tech firms.

Renault, for example, has stated that it will collaborate with companies ranging from China's Geely Automobile to semiconductor giant Qualcomm.

Separately, the French company is working to finalise a deal with Geely and to enlist Saudi Arabian state oil producer Aramco as an investor and partner in the development of gasoline engines and hybrid technologies.