Published on November 18th, 2019 | by Maarten Vinkhuyzen0
Surviving The Transition — Management Guide 101 For Renault-Nissan-Mitsubishi Alliance
November 18th, 2019 by Maarten Vinkhuyzen
I have learned that it is easy to say what is wrong, but more productive to look at possible improvements. After recently making clear what I think of the new Renault hydrogen initiative, I owe them a follow-up about the realistic, not-so-realistic, and fanboy-dreamt possibilities they have at their fingertips.
First, a short mention for the other disputable EV plan Renault has: Just like PSA and some German competitors, Renault has the intention to launch a couple of plug-in hybrid electric vehicles (PHEV) next year. These are for the midsize to large (for Europe) vehicle class. A capable fully electric powertrain would make these vehicles too expensive, in the expectation of these companies’ marketing gurus.
The new EU regulations force a large reduction of CO2 emissions in the coming years. What is important now is speed to market with vehicles that reduce emissions according to the test protocol. A PHEV can be brought to market a lot faster than a fully battery electric vehicle (BEV) based on a completely empty-sheet design. The CO2 reduction on paper is impressive (and completely unrealistic), which might be better than paying billions of euros in fines.
The EU regulations are clear to all automotive managers. It is why all automakers have programs for new BEVs and PHEVs to be sold in volume in 2020. What most managers don’t see, but should be a bigger stimulus, is what I wrote in “The Osborne Effect on the Auto Industry.”
Now is the time to claim the runner-up position in the transition to fully electric vehicles in Europe. Tesla is out of reach for the competition. Volkswagen Group and PSA have a cohesive plan for their brands. Renault, with only Dacia, is too small to develop and produce the models to compete. To stay relevant, the Renault-Nissan-Mitsubishi Alliance (“the Alliance”) has to get its act together and start working and planning like single entity in the transition to a fully electric automotive industry.
Now your favorite grumpy old backseat driver will give an impersonation of an armchair general telling the Alliance management how to do it. This Monday morning quarterback knows how to win this game!
The Management Summary
- Wake up
- Make rebadged Twingo ZE, ZOE50, LEAF62.
- Mitsubishi: i-MiEV II, Space-Star, Space-Runner.
- Nissan: Petal, LEAFlet, LEAF62
- Renault: Twingo e-Power, ZOE50, Grand LEAF62
Alliance in Europe
Let’s start by discussing the Alliance’s BEV possibilities in Europe. The markets in China and the USA are too different to discus in the same article as the European market.
In Europe, the Alliance has four brands. Those are Renault, Nissan, Dacia, and Mitsubishi. Renault, Dacia, and Mitsubishi target different parts of the public. Nissan targets approximately the same public as Renault. It has a strong line of CUVs, a single hatchback in the B-segment, a lonely van, and sports cars costing over €100,000. Not a strong and coherent product gamma.
The electric offerings of Nissan and Renault were strong few years ago. Miscalculations on battery size, range, and charging have hurt the advantage the Alliance once had. Ignoring and denying the battery problems that occurred in the first few years, and being very slow with repairs, also did not help. Nevertheless, the current market position and offerings are impressive.
In the passenger vehicle (PV) market, the Alliance has the i-MiEV in the A-segment, the ZOE in the B-segment and the LEAF in the C-segment. In the light commercial vehicle (LCV) market, the Renault Kangoo ZE, the Nissan e-NV200, and Renault Master ZE are together a complete line of cargo vans, with people carrier versions of the Kangoo ZE and e-NV200 as well.
The first problem with this lineup is that it is dispersed over three companies — Renault, Nissan, and Mitsubishi. An improvement would be if this line-up was in a single company. It could be even better if all three companies sold all of the models.
This is probably not realistic for the LCV models. Mitsubishi sold its van and truck division to Daimler some years ago. But Nissan and Renault selling all three vans looks mighty realistic. There is not that much difference between the model lines of both companies.
The second problem is again battery sizes. While Renault and Nissan were in the process of realizing that their offerings were just too short ranged for a breakthrough into the volume markets, competitors like Hyundai, Kia, PSA, and VW launched brand new models with more range. The new LEAF62 and ZOE50 now have ranges that also make them candidates for mass market acceptance.
For the LCV models’ battery sizes, the management still needs some convincing. In a recent discussion with the LCV sales manager of a local dealership, it was the main topic. A long litany of missed sales is due to not enough battery capacity. The problem is their batteries being too small and prices being too high. Both problems should be tackled via cooperation between the LCV and PV divisions of the Alliance.
For us simple private drivers and green car aficionados, the passenger cars are what really interest us.
The A-segment is the most complex. In it we have the Mitsubishi i-MiEV, a 10 year old first-generation BEV that did not see many improvements over the years. It is only produced because of lack of a replacement. Besides being sold by Mitsubishi, it is sold by Peugeot as the Ion and by Citroen as the C-Zero. Renault designed the Twingo III as an electric car, but when production got near, the company decided to put a gasoline engine in the trunk until electric powertrains became more competitive — using the same platform, or dear I say, the same body in white, as Daimler used to build its Smart forfour. The Smart, a product in a more expensive small market segment, was given an electric powertrain a few years later.
Now that Volkswagen Group is bringing its electric triplets (VW e-Up!, Seat e-Mii, Skoda CITIGOe iV) to market, it is time the Alliance gets serious in the A-segment. Based on the same Twingo III body in white Daimler uses, and an updated fully electric powertrain, a new i-MiEV II can be build. Hopefully Peugeot and Citroen are willing to sell the new i-MiEV II as the modernized Ion and C-Zero due to lack of an A-segment alternative of their own.
A Nissan-rebadged colorful model of this new i-MiEV II, let’s call it the “Petal,” could be the starting point of a branch of green cars.
Dacia has the task of bringing the micro-CUV K-ZE to Europe. Perhaps it could be the fully electric baby brother of the Mitsubishi Outlander PHEV.
What is missing is the Renault version. The Twingo is one of Renault’s mid- to high-volume models. It is too early to replace it with a 100% battery electric version — the price would become too high even with a small battery. Offering it besides the gas versions is a difficult sell since the price difference would be too big. Replacing the gas version as Volkswagen Group is doing would cost too much in sales volume.
Luckily, Alliance partner Nissan has the e-Power serial-hybrid electric powertrain, bringing most of the advantages of electric driving with little extra cost and no requirement to plug in. With the experience of the Nissan Note in Japan, this should be a no-brainer to put into the Twingo. It would not surprise me if doing so doubled the Twingo’s sales in Europe.
The electric B-segment is owned by the Renault ZOE. PSA is launching the e-208, e-2008, and e-Corsa as main contenders. Fiat, Mini, MG, and Honda are trying to sell small-battery BEVs that could be niche players. While Renault is a strong brand in most of Europe, to stay relevant with a 7 year old model is hard when so many young competitors come to market.
The revamped ZOE50 needs extra attention, extra sales, and more market reach. This can be gained by making a rebadged ZOE50 as a Nissan “LEAFlet” and a Mitsubishi “Space Star” as well. Both would be adapted with body panels and lights to speaks their brands’ design languages and fit into the brands’ lineups.
What the VW Golf is for the fossil fuel C-segment, the Nissan LEAF is for the battery electric C-segment. It is the defining model in its class, besides being the all-time best seller worldwide for many years. It missed the chance to compete with the Tesla Model 3 when it upgraded 2 years ago to a 40kWh battery instead of the 60kWh battery the market expected. The new LEAF62 is being received by many as a bit too little too late.
Renault has the challenge of turning the LEAF into a larger ZOE or a Megane model. Not completely impossible — the Grand ZOE62 or Megane Z.E. could be recognizably different from other Megane models. There are plenty of different body shapes.
As a second option, it might be a good idea to put a Scenic body on the LEAF chassis / battery. (Probably one of my fanboy dreams.) I did drive a number of original Scenics back in 1997–2000. I still think the original one was the best looking, and does probably have the best aerodynamics for an electric compact MPV. [Editor’s note: I normally agree with you, Maarten, but the original Scenic is FUGLY! The idea of a modern electric Scenic, now that I Googled it, is a new fanboy dream of mine, though. Thanks!]
With the ZOE50 as an electric Space Star, it might be a good idea for Mitsubishi to bring the Space Runner back as a rebadged LEAF.
Nissan made a BEV based on its best-selling Sylphy in China. The LEAF was too expensive for that market, unfortunately. The Sylphy is a C-segment car that gets nearly half a million unit sales per year in China. Dacia should look into bringing the Sylphy ZE to Europe to create a Dacia family of BEVs.
In the LCV segment, the Nissan and Renault offerings can easily be merged into two lines covering the whole van segment. The higher volumes reachable by selling them using two brands and sales organizations make larger batteries and lower prices commercially possible.
Nissan and Renault are the two market leaders in fully electric vans. Combining them this way could create market dominance for the next few years.
Comparing Young BEVs with Older, Experienced Models
What is proposed here is a crash program to prevent the Alliance from being overwhelmed by the avalanche of new models coming from Volkswagen Group and PSA Group.
Old models competing against new models based on VW’s MEB platform and PSA’s e-CMP platform would normally be a losing proposition. The Alliance has to offer something extra to compensate for the age of their models. Years of pioneering in the EV market have resulted in a number of strong supporting technologies. Renault, Nissan, and Mitsubishi are among the leaders in vehicle to home (V2H) and vehicle to grid (V2G) solutions. The CHAdeMO charging system is the primary system for these technologies. Home storage is another component in development by the Alliance partners.
Combining these separate technologies into a single integrated Alliance solution and offering it with all the BEVs of the Alliance brands is digging the first moat. For many people, especially in less densely populated areas, the V2H & V2G technologies open up the possibility of integrating theirs car with their homes.
Using the Joker
The V2H & V2G support is not enough to win many sales from the competition. Another asset the Alliance has is the Nissan ProPilot system. This is perhaps the best Advanced Driver Assist System (ADAS) after Tesla’s Autopilot. Nissan marketing departments will fight the next suggestion tooth and nail, seeing huge margins (on small sales numbers) evaporate. To gain decent margins on a huge number of sales, though, it is absolutely necessary.
Making ProPilot a standard function on all Alliance BEVs would be a winning move. The competition has nothing comparable to offer. It is like playing a Joker card from one’s sleeve.
The pressure from the Nissan marketing and ProPilot development departments to add a hefty surcharge to all the BEVs has to be ignored. The goal is to create a better value proposition. Most customers will only appreciate it after experiencing it, followed by them becoming very strong and vocal advocates of the Alliance models.
At first it will only be a deciding factor with the more knowledgeable customers. The big win will come from the word of mouth of these first customers, reinforced by reviews in the press.
This last part is not a solution for the transition. The development of dedicated fully electric platforms needs to proceed with the highest priority. In the next 3–4 years, all models have to be replaced by fully electric versions. Fossil fuel models can be produced until demand is too small to make that worthwhile, but that is a moment that will come far sooner than anyone believes.
All Alliance managers should make a back-of-the-envelope calculation.
- How much will the ZOE cost more than the Clio when produced in the same volumes?
- How much will it cost to get the Clio to comply with the 2025 EU emission targets?
- How much will the ZOE powertrain development cost be over that period?
- What will customers choose when they are beside each other in the showroom?
Before 2025, every internal combustion model will face competition from a fully electric model within the same brand, or a competing model from another brand. Before 2025, every customer will know that a fully electric auto is just a better auto, even when it costs slightly more, and especially when it costs less.
The competition between battery electric and fossil fuel vehicles is over. All that is left is surviving and managing the transition.
To compete with Volkswagen Group, PSA/FCA, and Hyundai/Kia for a leading position in the auto market after the transition (Toyota seems to have withdrawn from that race), the Alliance has to learn to operate as a single entity.
Outside Europe, there is time to develop new models on the common platforms. Inside Europe, due to the acceleration forced by EU emissions regulation, the next two years are crucial.
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