Nissan, Renault, and Daimler announce new strategic alliance
It’s a small world, after all.
Renault and Nissan today announced that they are expanding their alliance to include Daimler AG, maker of Mercedes-Benz automobiles.
At the press conference in Brussels, Carlos Ghosn of Renault-Nissan and Dieter Zetsche of Daimler explained that they will partner on a new small-car platform that will be used as the basis for the next-generation Renault Twingo and Smart cars, including an all-new four-seat Smart model. The companies will also share gasoline, diesel, and electric powertrains.
To solidify the new three-way alliance, the companies will each take a stake in each other. Daimler will buy 3.1% of both Nissan and Renault and the Franco-Japanese alliance will in turn buy a combined 3.1% share in Daimler.
The alliance is the latest move following a turbulent year in which Saab and Volvo were sold for pennies on the dollar and Pontiac and Saturn were closed permanently. 2009 saw Renault’s first annual loss in 13 years. Daimler, too, had a tough time with net losses of 2.6 billion euros.
Automakers today face rapidly escalating costs from new safety, emissions, and fuel economy regulations. To compete profitably, they require massive economies of scale. “The name of the game is to be present everywhere,” Nissan’s CEO explained, “so we are going to move for more and more consolidation.”
On it’s own, Daimler would be unable to generate the economies of scale needed to sell small cars at a profit. Likewise, the Infiniti luxury division of Nissan lacks the economies of scale needed to equip their luxury cars with fuel-efficient diesel engines in Europe. Through the alliance, each partner will have access to the platforms and engines it needs to survive in an industry where costs are rising rapidly.
The difficulty, of course, will be in creating products that stay true to each brand’s unique character. Will customers warm to the idea of a humble Renault engine under the hood of a luxurious Mercedes? Will diesel-powered Infiniti vehicles steal sales from their German partners?
The three companies claim to have studied these possibilities and intend to use separate technology packages to maintain their unique personalities. “Each brand has its own identity and its own kind of products and its own cost and price level,” Renault boss Carlos Ghosn said. “We need to keep each brand very different from the others.”
Juergen Pieper, an analyst with Metzler Equities in Frankfurt said that the risk to Mercedes is “practically zero,” reminding that ultra-luxury brand, Bentley, is owned by Volkswagen and still has no trouble commanding prices above $200,000 per vehicle. The alliance, he noted, will be, “really touching only small cars and this is not a sensitive part of the group.”
Helmut Becker, an economist with the IWK think tank in Germany added, “there is no mixing-up in the product lineup, and [parts sharing] will happen under the hood.”
Renault and Nissan have been in a successful alliance for the past eleven years, though they generally don’t compete in the same market spaces. It remains to be seen, however, if the addition of Daimler will create tension.
For the time being, at least, Ghosn is predictably bullish. “Do not be surprised if we continue to add scale.”
