3 June 2019

Nissan’s seat at a new alliance table

With the news last week that a merger between FCA-Chrysler and the Renault-Nissan-Mitsubishi Alliance is gaining traction, it is a good time to reflect on how the Alliance has performed for Nissan and where the Japanese carmaker might find itself after such a union.

For while the deal looks particularly favourable for Fiat Chrysler, as it would give it access to the Alliance’s technical and sales leadership in electric and hybrid vehicles - the Nissan LEAF is the world’s top-selling EV, with sales of more than 400,000 since its launch in 2010 - the EV technology from Nissan and Mitsubishi is licensed on a royalty basis that pays on each usage of the advanced electric powertrain technology, and of use of Nissan platforms. At present the relationship is not as reciprocal as it might be; Nissan pays more for Renault technology than Renault pays for Nissan tech and this is an irritation to the Japanese carmaker’s management.

Nissan management have felt somewhat sidelined since the brand’s revival under Carlos Ghosn’s stewardship; when Renault took its 43.4% share, the Japanese carmaker was technically flatlining, when all liabilities and costs where calculated according to the Japanese system of accounting. Since then, Nissan has become the star of the Alliance, with models such as the Qashqai and LEAF dominating their segments but it has only a 15% non-voting share of Renault and this would be reduced 7.5% in the event of the FCA deal coming to pass, a somewhat unpalatable pill for Nissan’s management to swallow as it is by far the larger company.

As emissions regulations get tight around the world, it is simply good business sense for FCA to ‘buy-in’ the Alliance’s advanced petrol, diesel, EV and hybrid powertrain technologies, a much cheaper option than developing its own cleaner engines.

The Alliance would gain Chrysler and Jeep’s all-wheel-drive and SUV portfolio, strengthening its offering globally, and in North America particularly, where is does not have a convincing SUV line-up. Of course there would be some cannibalisation as many models would overlap but the Alliance, which I believe would end up being the stronger partner, has shown how adroitly it can juggle platforms, technologies and market segments with a multi-brand approach.

This leaves Mitsubishi, in theory the weakest member of any new union. Upon closer inspection, the three-diamond brand would be in a strong position; it can use its market dominance in Southeast Asia to negotiate some territory ‘swaps’ with FCA, offering its widespread distribution network to Jeep and possibly Fiat in return for access to FCA outlets in North America and Europe.

Overall, Nissan should be in a strong position, on model and market terms but it will take some determined bargaining for it to have a significant voting and financial place at any new alliance’s table.

Simon Duval Smith

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