Looking to fund its shift to electric vehicles, Renault Group is contemplating selling a portion of its stake in Nissan, a move that could also ease longstanding tensions with its Japanese alliance partner, according to multiple online reports.
Renault owns 1.83 billion shares, or 43%, of Nissan, a stake worth €7.1 billion, or more than $7.6 million. In contrast, Nissan owns 15% of Renault and lacks voting rights, even though the French government owns 15% of Renault, yet has double voting rights.
This disproportionate crossholding arrangement has long been a point of contention in the Renault-Nissan Alliance. If a share sale comes to fruition, it could help ease tensions without unravelling the 23-year-old alliance.
With ¥2 trillion, or $15.6 billion, in cash and equivalents on hand, one company that could be interested would be Nissan. But any change in the Alliance could take months, particularly if Nissan purchases shares.
But the Japanese automaker’s fiscal year operating profit, its first since 2019, could put Nissan’s Chief Operating Officer Ashwani Gupta is a better position to pursue it when he travels to Paris next week for discussions with Renault Chief Executive Officer Luca de Meo.
Yet Renault saw its fortunes improve in 2021 as well, reporting a net profit of €888 million, or $1 billion, after the previous year’s €8.01 billion loss and a €141 million loss in 2019 following the arrest of Chairman Carlos Ghosn.
Part of a long-term strategy?
The share sale would help fund Renault’s restructuring plans, first outlined in February. The strategy calls for Renault to create separate divisions for electric and internal combustion engine vehicles, similar to Ford Motor Co.’s plan.
The company is also considering separating and listing its EV business, allowing the ICE unit to work with another partner. One possibility: Geely Holding, parent of Volvo Cars AB. Renault is currently talking with Geely about a Chinese joint venture, and came to an agreement with Geely in January to jointly design and produce vehicles in South Korea.
Renault’s plans come after Nissan’s November 2021 announcement to invest ¥2 trillion, or nearly $18 billion, to electrify its line-up. The company will offer 23 “electrified” vehicles by 2030, including 15 all-electric models.
They will account for 50% of the global sales for the Nissan and Infiniti brands, though that could reach as much as 65%, depending upon the market. Nissan is also planning to invest ¥140 billion, or $1.23 billion, to develop solid-state batteries, launching a pilot plant in 2024. It aims to have them in mass production by 2028.
Other issues weigh on Renault
The moves come against the background of Renault’s decline in first quarter revenue, as the conflict in Ukraine and semiconductor supply issues affected vehicle sales.
Dacia and Lada saw income fall by 2.7% from a year earlier to €9.75 billion, or $10.6 billion. Excluding AvtoVAZ and Renault Russia, revenue was down 1.1% to €8.9 billion, or $9.6 billion
Renault is also currently in negotiations regarding the future of its Russian unit AvtoVAZ, as Lada manufacturing has been suspended since the start of the Ukraine war. Russia is Renault’s second-largest market; its loss causing a non-cash accounting charge of €2.2 billion, or $2.4 billion.