PARIS (Reuters) – Nissan Motor Co and French carmaker Renault announced a new deal on Wednesday, including a review of their investment ratios, pitching it as a major step to revive the overstretched Japan-France alliance than 20 years. However, the benefits of the new deal for Renault are not clear at this stage and the details may be very limited, industry sources said.
Renault will cut its stake in Nissan from around 43% to 15%. Board approval is required for implementation.
The benefits for Nissan are clear. Managerial discretion will increase, and the unequal capital relationship will become equal. But Renault’s 3.8 billion euro ($4.1 billion) stake in Nissan could come under pressure as it sells it at some point after being entrusted to a trust company.
Under the agreement, Nissan will invest in Ampere, a new electric vehicle (EV) company to be set up by Renault. Ampere is an important business objective for Renault.
But Nissan’s investment in Amper comes with a number of caveats. At the moment, the details of the joint venture project are vague. Furthermore, Nissan’s acquisition of voting rights in Renault’s 15% stake will force Renault to share decisions with the company.
The two companies are considering about five joint projects, according to people familiar with the matter, fewer than the 10 to 15 that Renault Chief Executive Luca De Meo proposed to Nissan last year.
“Apart from the financial side, there aren’t many tangible benefits to the deal for Renault so far,” said one of the people.
“Nissan’s participation in Ampere is interesting for Renault, even if it is only an investment. The focus on Latin America and India is also interesting because of the economies of scale. But no numbers are given. No, it continues to be very vague.”
Renault shares fell after the announcement.
“In some ways, it is[y fargen hon]represents the failure of the first partnership,” said Gregoire Rabelin of Renault shareholder Sesga Asset Management.
More details of the deal are expected to be announced in London on February 6, according to people familiar with the matter.
The Nissan-Renault alliance has been badly hurt by the arrest and dismissal of former chairman Carlos Ghosn.
Ampere will be the benchmark for a new deal, according to people familiar with the matter.
Although Renault was one of the first to enter the EV market, it is now lagging behind latecomers Tesla.
The company is betting that Ampere will be launched separately from the internal combustion engine car business. It aims to re-enter the competition as a pure electric company by going public at a valuation of up to 10 billion euros.
An industry source said: “If Nissan is putting money and resources into engineering — technology and teams — that would be a pretty good sign and the alliance would continue, at least in part, but that’s hypothetical at this point when. I have no choice,” he said.
Wednesday’s announcement only gave a rough idea of what the management project would look like.
Both companies emphasized that they are considering projects related to markets, vehicles and technology in Latin America, India and Europe, where they already have plants and participate in joint production.
The industry source said, “Since Nissan will hold Renault’s voting rights, the alliance will be bound by the will of the Japanese side.”
Analysts who had hoped to streamline the Renault business were disappointed last November when De Meo announced that it would split the business into five independent units.
Renault also announced that it will strengthen partnerships with Zhejiang Geely Holding Group (Geely Group), US Qualcomm, and US Google. Among them, Geely will make a major investment in Renault’s internal combustion engine business.
Nissan, which is wary of leaking technology to many outside companies, may think such a closer partnership is going too far, according to people familiar with the matter.
Ion-Marc Valahu, a shareholder of Claire Invest, said that Renault did not provide new information on when to sell Nissan shares or how to operate the management of each division, he said he thought it had something to do with it.
(Reporter Gilles Guillaume)
