In 2017, 10.6 million passenger vehicles were sold by the Renault-Nissan-Mitsubishi alliance. Nissan sold more than 5.8 million vehicles, Renault sold more than 3.7 million vehicles, and Mitsubishi sold over 1 million vehicles. The alliance recorded the best results in countries such as India, Russian, Turkey, Iran, and Brazil. The U.S. and China were the biggest markets for both Renault and Nissan.

For a while now, rumors of a merger between France and Japan-based automakers are rife the market. Looking at the 10 million passenger vehicle sales, the merger will create the best brand in the automotive industry. Renault owns stakes in AVTOVAZ, a Russian based automaker. Mitsubishi and AVTOVAZ have a strong partnership alliance and will become part of the Renault and Nissan merger. The new company is expected to operate with a new brand name in a neutral location. Renault already has a major stake in Nissan, whereas Nissan has very less stake in Renault. Renault also has the voting right in Nissan, whereas Nissan does not have any voting rights in Renault. Furthermore, Renault’s major stake is held by the French government, so it will be difficult to go for the merger with equal rights. In addition, both the automakers have a different cultural background, so the merger needs to get a go-ahead from both the companies to operate and share technology in an inefficient way. If it is a hostile takeover, the merger will result in major issues and will not perform in the market as expected.

1.         Manufacturing

Renault and Nissan have worked in synergy to increase market penetration in emerging markets such as India, Brazil, and Russia. The manufacturing facility in India manufactures cars of different brands for Nissan, Datsun, and Renault. With the help of the Brazilian plant, Renault and Nissan both manufacture their vehicles to target the Mexican market. In the past, Renault passed the diesel engine to Nissan and shared the manufacturing plant. By 2020, the alliance is expected to implement CMF (Common Module Family) tooling, which will further help manufacturer to manufacture any vehicle in any plant across the globe. This will certainly an advantage if the merger takes place.

2.         Engineering

The CMF module is being developed to reduce the manufacturing cost. With almost all the vehicles expected to be built with the help of the same platform, this will reduce the engineering cost by approximately 40% and purchasing cost by approximately 40%. Renault has replaced its dual clutch transmissions with continuous variable transmissions developed by Nissan. This further suggests that the alliance is moving towards common drivetrain and powertrain options or one technology option across all brands. The CMF tool will further help increase and speed up production with high efficiency.

3.         Procurement

Renault Nissan Purchasing Organization is responsible for making purchases for both brands in the alliance. The synergies of two different platform will allow the purchasing organization to operate with the very high scale of economy. If Mitsubishi and AVTOVAZ merge, the purchasing organization will get the chance to operate at an even high scale of economy.

The Future

The French government holds the majority stake in Renault. Nissan does not have any voting rights in Renault, whereas the French government has the voting rights in Nissan, as Renault holds the highest stake in Nissan. To get the better deal and to be heard whenever necessary, Nissan needs to get more stake in Renault and the voting rights. This will further ensure that both the parties have an equal say in most matters. An environment such as this is very important for success in the future. The merger of both parties, considering it becomes fruitful in the future, this will help them accrue more share of the automotive market.

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