Renault-Nissan-Mitsubishi, between success and crisis

Renault-Nissan-Mitsubishi is an alliance between three famous car manufacturers. This Franco-Japanese alliance has been for some years in the top three sellers of cars.

The story of Renault Nissan Mitsubishi started in 1999 when Renault and Nissan entered into a transnational partnership. Renault has 43.4% of the capital of Nissan and Nissan has 15% of the capital of Renault. This alliance between two big companies happened when Nissan had some financial difficulties. Renault bought Nissan and named Carlos Ghosn president to restructure Nissan. Both car manufacturers have a mutual interest and are forced to have “win-win” strategies which have to be beneficial for both.

In 2011 Renault-Nissan became the third biggest car manufacturer in the world after Toyota and Volkswagen.

Renault-Nissan extended its partnership with Mitsubishi in November 2016. Nissan has 34% of Mitsubishi’s capital. The three companies keep their independence while being part of the alliance.

The following year, Renault-Nissan-Mitsubishi became the biggest seller of light vehicles in front of Volkswagen, Toyota and General Motors. It’s a success for the alliance but some people disagree with the fact that an alliance with three companies is compared to a company like Volkswagen because in one company there are three companies so it's unfair.         
Moreover, the alliance fought for the first place of 2018 because the German car manufacturer sold more vehicles than Renault-Nissan-Mitsubishi which stopped selling heavy vehicles. Nevertheless, Volkswagen sold fewer cars than the alliance of the three companies but sold more vehicles (cars and trucks). Both companies continue to think they are the biggest seller of the year 2018.

A serious issue happened in 2018. On November 19^th Carlos Ghosn and Greg Kelly, Nissan’s CEO and development director, were arrested and detained in Japan following a denunciation by Nissan. They are accused of tax evasion and abuse of business property. In late December Greg Kelly was released on bail while Carlos Ghosn is still suspected to have used Nissan’s money for several years for the purpose of paying his sister for her fake job or to give money to Lebanese universities and to not have declared his wage. Ghosn’s lawyers deny these accusations and they asked Tokyo’s court to cancel the prosecution due to a procedural defect. They accused Nissan’s representatives of conspiracy with the judicial system in order to evict Carlos Ghosn and to avoid strengthening the alliance between Renault and Nissan. The trial of Carlos Ghosn is to be held in April 2020.

This case has some consequences for Renault-Nissan. Renault’s share price is decreasing and there is a drop in sales. Renault's share price has fallen by almost 8% since the media reported this case and has reached its lowest level since January 2015.  For Nissan the share price has also fallen with a loss of 7% when the case was revealed to the public. That is why investors follow every change of this case. Each announcement has direct effects on the price of both share prices. The forecasts are that the drop is going to continue, however an increase in the prices is also not impossible according to the outcome of the trial or the discoveries of new elements in favor of Carlos Ghosn.    
It has also affected the brand image of the group. Indeed, according to a recent study, it seems that Nissan and Renault brands are directly affected by this case. The "Buzz index" which calculates the evolution of companies’ brand image decreased by 14.4 points for Renault and by 12.9 points for Nissan.         
Of course, this case also impacts the future sales of these groups with a reduction in purchase intentions of nearly 1.3 points for Nissan and a relative stability of intentions for Renault. 

Despite the fact that Ghosn’s case has negatively impacted Renault-Nissan, the third company, Mitsubishi which was saved by Nissan and Carlos Ghosn in 2016 shows better economic performance than its two partners. The company had some difficulties but since it has been in the alliance the sales are better than before. 1.2 million vehicles were sold (+ 13%) and the turnover of the smallest player in the alliance jumped by 15% last year, and its operating income increased by 14%. Mitsubishi mainly benefited from the performance of its Southeast Asia division. However, Osamu Masuko, the president of the firm thinks that the outcome will change in 2019 and will be less good than 2018.   

The new president of Renault, Jean-Dominique Senard, tries to review the operation of the alliance. In spite of the rumors, Nissan doesn’t want to leave the alliance. Hiroto Saikawa, the president of Nissan said that the Alliance is not important, it is crucial and he is convinced that the Alliance is a key competitive advantage for the three businesses.    

We are now waiting for the outcome of Carlos Ghosn’s trial which can be more negative than now for the alliance. If you want to invest in the Renault-Nissan share price you should follow the case of Carlos Ghosn in order to buy it at the right time before prices begin to rise again.              

Nelly. H

Sources :
LePoint automobile : "L'alliance Renault-Nissan-Mitsubishi, le numéro un du marché mondial automobile", 19/11/2018
LePoint automobile : "Affaire Ghosn : Greg Kelly libéré sous caution", 25/12/2018
LesEchos : "Mitsubishi donne du baume au coeur à l'alliance Renault-Nissan" by Julien Dupont-Calbo, 09/05/2019
Challenges : "L'alliance Renault-Nissan-Mitsubishi, numéro un auto mondial" by Alain-Gabriel Verdevoye, 05/05/2017
Automoto : "Marché Auto : Mais qui est vraiment le numéro un mondial ?", 31/09/2019
LaDepeche.fr :  "Comment Carlos Ghosn aurait utilisé l'argent de Nissan à des fins privées", 29/10/2019
CNEWS : "L'impact de l'affaire Carlos Ghosn sur le cours de l'action Renault" , 29/01/2019

Images :
RTL : "Carlos Ghosn : "Les Américains sont venus à l'aide des Japonais", 24/09/2019
Wikipédia : Renault-Nissan-Mitsubishi