The Renaulution continues… Methodically and gradually, Luca de Meo unravels almost twenty years of strategic and industrial beliefs at Renault. After reviewing the range, the commercial policy, the management and the supply chain… the boss of Renault now attacks an absolute totem of the French car group: the Alliance with Nissan. According to the echoes, he would be ready to descend to the Japanese capital, in which he has owned 44% of the capital for over twenty years, to gain access to a 15% residual stake. This scenario is an unexpected historic break, as this participation was seen as a quasi-control over Nissan. Elle était également vécue comme le socle de l’Alliance Renault-Nissan telle qu’elle était voulue par l’État français (qui détient 15% de Renault), c’est-à-dire avec une domination de fait du japonais par le French.
A broken but necessary alliance
But Luca de Meo is not acting out of order… And above all, there is no end to the Alliance with Nissan, which nevertheless gives access to an industrial scale of 8 to 10 million cars per year… Another dimension for a Renault that peaks at 3.5 million registrations per year. But in fact the Alliance has been flat for several years… Officially since the arrest of Carlos Ghosn in November 2018 in Japan, unofficially, since the emergence of the French state in the capital of Renault in April 2015 with the affair of double voting rights , and the underlying desire to take control of Nissan, i.e. more than 50% of the capital, arouses distrust in Japan. It was therefore imperative to relaunch the Alliance with Nissan… But on new bases.
Luca de Meo’s genius idea lies in Ampère, this subsidiary dedicated to electrical activities, which he plans to list on the stock exchange in 2023. It would then be a matter of shifting the Alliance’s center of gravity to a new industrial partnership. case, electromobility, which requires significant investment, but also patents.
“The markets are focused on this famous IPO which is expected for 2023. The announcement of a rebalancing of the stakes makes it possible to remove what had become a brake on an alliance that no longer functioned well enough. Renault is thus on the loose We need to get rid of this constraint that stifled decision-making and innovation at a time when the market is increasingly reliant on R&D,” analyzes Benjamin Sacchet, associate director and asset manager at Avant-Garde Investment.
“This plan could rebalance the alliance with Nissan. It’s a nagging question, but it had to be clarified to move forward”is full of Frédéric Rozier, manager at Mirabaud. “The plan would be to reallocate capital to the most profitable segments, especially those around electrification. This is very good news. This will allow Renault to regain attractive valuation levels, as we see for pure player electromobility such as Rivian, Lucid or Tesla”he adds.
The market is again interested in Renault
It must be said that the reaction of the market was not long in coming. The Renault title gained almost 8% in the first exchanges on Monday, the day after the article echoes. Renault’s valuation is a real issue as it is worth barely more than its stake in Nissan at €9 billion. The French group is suffering from very poor results up to 2020 and from an unfavorable comparison with the other French company, Stellantis, whose financial ratios are much higher. Finally, the economic situation is particularly unfavorable for the sector and is pushing relentlessly underperforming stocks… But it seems that Renault is at a tipping point…
“Renault is ahead of its strategic plan. It has already achieved its 2025 targets. Profitability targets close to Stellantis are now being considered. The period is reminiscent of that of PSA at the start of Carlos Tavares’ mandate and I have seen the company recover very quickly,” notes Frédéric Rozier. “Market operators are suddenly excited about the Renault title again. It is a real turning point, the perception of the group has really changed,” continues the Mirabaud manager.
“Renault is in the process of correcting the issues that limited its attractiveness a year ago, such as a failing shareholder structure, a complicated balance sheet and diminished investment capabilities. This is reflected in a return to favor with the market”explains Benjamin Sacchet. “Renault will create financial room for maneuver that it has yet to settle in the allocation: reduce debt, redistribute among shareholders, invest in innovation… In any case, this is good news for the group”he decides.
Waiting for investor day
But Renault will first have to work out the expected plan. For the time being, the information has not been confirmed… Because even though the French group has confirmed through a press release that there are many talks with Nissan on these topics, nothing has yet been confirmed about the scope of the agreement. Especially since Nissan seems to want to maximize the rebalancing of the forces. In addition, market demand for pure electric car shares appears to be running low, as evidenced by the decline in shares of Rivian and Lucid over several months. Finally, Renault must confirm that this revision of the Alliance was done in consultation with the French state.
The market therefore expects extremely precise answers during Renault’s Capital Market Day (investor day) scheduled for November 8 on this IPO as well as on the new partnership with Nissan. Despite the spectacular results of the past two years, Luca de Meo knows that his turn is expected…