Renault EV’s Plan to Invest in Ampere Unit Sends Nissan Shares Down

Renault’s bold move to invest in Ampere, its electric vehicle and software entity in Europe, has sent ripples through the market, causing a dip in Nissan’s shares. The French automaker, Renault, and its Japanese partner, Nissan, jointly announced their plans to enhance cross-shareholdings in the alliance, finally addressing a long-standing disparity that had strained their collaboration.

As the automotive giants set their sights on a new chapter of the alliance, regulatory approval will be the final hurdle to clear before forging ahead with this transformative investment plan. This article of Investmentchannel.net delves into the details of this strategic move, its potential impact on both companies, and the market’s reaction to this significant development.

Nissan’s €600 Million Investment in Renault’s Ampere Unit Sparks Market Reaction

Nissan, the Japanese automaker, has revealed plans to invest a substantial sum of 600 million euros (equivalent to $663 million) in Ampere, the European electric vehicle and software entity owned by Renault. In a joint statement, both Renault and Nissan announced their intention to establish more balanced cross-shareholdings in the French-Japanese auto alliance, thereby eliminating a longstanding disparity that had caused friction between the two companies.

A Step Towards a More Balanced Alliance

Under the new arrangement, Renault Group and Nissan will retain 15% cross-shareholdings in each other. Additionally, Renault will transfer 28.4% of its Nissan shares into a French trust, ensuring that the voting rights of both parties remain at 15% of the total. The companies view this move as a significant step that allows them to embark on the next chapter of their alliance. Jean-Dominique Senard, the chairman of the alliance, expressed his optimism about the agreements signed and their implications for the future.

However, the proposed change is still subject to regulatory approval, which means the final implementation will depend on the authorities’ green light.

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From the Brink of Bankruptcy to Collaborative Growth

The Renault-Nissan alliance traces its origins back to 1999 when Nissan was on the verge of bankruptcy. Since then, the partnership has weathered various challenges and is continuously evolving. As part of the investment plan, the two companies will join forces to work on marketing, vehicles, and technology ventures in key regions such as Latin America, India, and Europe.

Nissan’s Financial Results and Market Outlook

Alongside the investment announcement, Nissan also released its financial results, indicating that its net profit in April-June had more than doubled, reaching an impressive 105.5 billion yen (equivalent to $753 million). Robust sales in most markets offset the weakness experienced in China. Additionally, the value of the Japanese yen played a role in bolstering Nissan’s bottom line, with a weak yen leading to increased earnings for Japanese companies with overseas operations.

Quarterly sales soared by 36% compared to the previous year, reaching 2.92 trillion yen ($20.8 billion). Despite this positive performance, Nissan revised its sales forecast for the fiscal year through March 2024 to 3.7 million vehicles, down from the initial projection of 4 million vehicles. Nevertheless, this revised target still exceeds the 3.3 million vehicles sold in the previous fiscal year.

Nissan’s Positive Outlook Despite Past Challenges

The Yokohama-based automaker, known for its Leaf EV and Infiniti luxury brands, remains optimistic about its future profitability. Nissan forecasts a net profit of 340 billion yen ($2.4 billion) for the fiscal year through March 31, 2024. This figure was revised upward from the previous forecast of 310 billion yen ($2.2 billion), which indicates growing confidence in the company’s ability to thrive in the market.

The Nissan-Renault Alliance’s Journey

The Nissan-Renault alliance has experienced its share of ups and downs. One prominent figure in this journey is Carlos Ghosn, who was sent by Renault to lead a turnaround at Nissan. However, his tenure as a star executive was marred by his arrest in Japan in late 2018 on various financial misconduct charges. Despite the challenges, the alliance, which also includes Mitsubishi Motor Corp., has been working to overcome the aftermath of the scandal.

Carlos Ghosn now resides in Lebanon after jumping bail in late 2019, and he recently filed a $1 billion lawsuit against Nissan in Lebanon. The case, scheduled for a hearing on Sept. 18, seeks compensation for damages, salary, retirement funds, and stock options. It is worth noting that Lebanon lacks an extradition treaty with Japan, adding complexity to the situation.

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Moving Forward: Alliance’s Electrification Drive

Nissan’s Chief Executive, Makoto Uchida, emphasized the alliance’s commitment to advancing its electrification drive. With the definitive agreements in place, the alliance is now entering a new phase of collaboration with Renault and Mitsubishi Motors, focusing on mutually beneficial areas of innovation.

Renault EV’s Plan to Invest in Ampere Unit Sends Nissan Shares Down

As news of Nissan’s plans to invest in Renault’s Ampere unit broke, Nissan’s share price experienced a modest decline of 1.2% on Wednesday. This investment move was seen as positive by most market participants, despite some investors expressing concerns over Nissan’s potential benefits in the Europe-focused unit. Critics argued that given the intense competition in the significant U.S. market for electric vehicles, Nissan’s returns might not be as substantial.

Nonetheless, it’s essential to highlight that Nissan’s stock has seen a remarkable run-up, with shares surging over 50% throughout the year, outpacing the Nikkei 225 index’s 27% climb. Nissan attributes this success to improved earnings from its North America business.

A Step Towards Greater Autonomy and Collaboration

Overall, the restructuring of the Nissan-Renault alliance is viewed as a positive development. The new structure will allow both companies more autonomy to pursue and establish partnerships in crucial areas, such as battery, electric vehicles, and software-related ventures. While the alliance may evolve, both Renault and Nissan are committed to growing individually while maintaining the strength of their partnership.

Nissan’s Chief Executive Officer, Makoto Uchida, aptly summarized the alliance’s direction, stating, “We’re not talking about divorce, but we want to grow individually and connect that growth with the alliance.” This approach reflects a balanced strategy that prioritizes both individual growth and collective progress within the alliance.

Source: https://www.wsj.com/livecoverage/fed-meeting-interest-rate-decision-today-july-2023/card/nissan-shares-dip-after-strong-climb-this-year-CQlt416Lp8qtcv2J7f4v?mod=Searchresults_pos1&page=1