Renault & Nissan Have A Difficult But Potentially Very Rewarding Journey Ahead
Renault and Nissan integration will be a difficult path.
The financial markets prefer a simple single company with one set of shares and one top management structure and don’t care much how the internal structure of the company is functioning. A holding company with a number of independent subsidiaries is completely fine to them, as long as the profits are good.
But the goal of the management is to make this alliance permanent and not easily revocable. Remember, the Opel part of General Motors was easily sold to PSA in 2017, because it was not an integral part of GM, just a company wholly owned by GM from 1929 onwards.
In an excellent article in the Financial Times, “Ghosn steers Renault, Nissan and Mitsubishi closer,” the problem was made crystal clear. The different cultures make the integration hard.
¤ Renault is marketing driven and focused on the customer and tries to satisfy demand with many different models and versions.
¤ Nissan is more technology oriented and thinks that their superior engineering skills will conquer the market.
In a stable market without large technological or functional changes, the Renault approach is often the best. But anybody who has listened to Tony Seba and his story about cellphones and AT&T knows that the market cannot tell marketing researchers what their appetite for future, and yet unknown new technology and functionality will be.
In the case of the transition from gas/diesel cars (ICEV) to fully electric cars (BEV), the Nissan approach is clearly superior. But French pride, which is just as stubborn as Japanese pride, is allergic to everything that is “Not Invented Here.”
When Nissan did have its own battery factory, Renault wanted to buy batteries on the open market, from any battery maker not owned by Nissan.
After the success of the e-Power drivetrain, which was even shocking for Nissan, Renault did not jump on it to copy the success by implementing the technology in its Twingo, a car practically designed for it. It could probably have doubled or tripled the sales of the Twingo. Nissan is implementing it in models ready for a fully electric drivetrain. These plug-less versions will create demand for the plug-in versions of these cars. I am not a supporter of a multiple drivetrain strategy like Hyundai is doing with the Ioniq, but in the case of Nissan, they can couple a full BEV with an e-Power version of the same car. This can be a great way to introduce their customers to the new technology.
A recent study in the USA showed that 20% of buyers did consider an electric car for their next purchase. That means that the other 80% is not willing to consider a car with a plug. For these 80%, the e-Power is the perfect next car. I think, in reality, the current portion of buyers of new cars that is willing to consider an electric vehicle is below 5%. That is 95% that can be targeted with the e-Power technology.
And, for most, once driving electric, there is no going back to ICE. And the e-Power drivetrain is the Nissan LEAF drivetrain. Upgrading in a few years to the fully electric versions should be an easy upsell for most dealers.
The Renault-Nissan-Mitsubishi Alliance is the global legacy carmaker best positioned to take advantage of the coming transition to electric cars. To do this, the Alliance needs the Nissan approach of leading the customer to the new technological future, before the competition starts moving. The Renault approach of following the market will not work — it will put the company in line behind those who are going to follow their own path, like VW and Hyundai.
This is a clear example of the difference between the technology-driven and the marketing-driven approach to developing new products. In an irreversibly integrated Alliance, there should be no room for these cultural differences. New technology should be developed and marketed using the Nissan approach. For existing models and technologies, the Renault method of model and version design can be leading. It is not either-or, but and-and, for the two approaches.
The new super structure of a management layer at the Alliance level, above the individual companies, with managers from both Renault and Nissan, has a difficult task. The managers need to not simply defend the interests of the companies where they made their careers. They should view every decision and policy on the merits. What is best for the Alliance? It is like asking the members of the American Congress to forget what District or State sent them to Washington and only consider the interests of the USA.
It is not clear to me whether these 30 top managers are full-time in their new role, with a staff to support them, or if this new structure is a meetings and responsibilities structure, with these managers spending 90% of their time in their previous roles.
Carlos Ghosn has 4 years to make the Alliance a single company. Can he withstand the wish of the financial markets that just want a single financial consolidated structure with a single public face for equity, debt, and reporting? Can he withstand a push for an owner structure where the Renault, Nissan, Mitsubishi, Infinity, Dacia, and Lada companies can be sold off if it is opportune for the stock value?
An irreversible Alliance is an Alliance where the integration and interdependence of the companies make it impossible to spilt off and sell a brand.
And whether that Alliance has a single financial face to the world, or the current incomprehensible one, is not very important for the future of the company.
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