Renault, which has faded out of the Chinese market, has recently been very active around the world, considering selling some of its shares in Nissan in order to support the independent listing of the electric vehicle business, and then it is unable to maintain the operation of its Russian subsidiary AvtoVAZ, and is negotiating with the Russian authorities for its future.
The only thing they have in common is that Renault chose to solve the problem by selling its shares. And behind this action, what kind of dilemma is revealed by Renault?
Operating pressure under the suspension of business in Russia
On April 26, Renault released its first-quarter financial report showing that Renault's revenue in the first quarter of this year was 9.7 billion euros, down 2.7% year-on-year. Among them, in the most core automotive business, Renault's revenue in the first quarter was 8.1 billion euros, down 1% year-on-year.
In this regard, Renault said that it was mainly affected by chip shortages and the Russian-Ukrainian conflict. It is understood that Russia is Renault's second largest market in the world, and its annual revenue in Russia is about 5 billion euros, accounting for about 12% of the revenue of its global automotive business.
In March, as the situation in Russia and Ukraine escalated, Renault had to close its Moscow plant and suspend all operations of its Russian subsidiary AvtoVAZ.
The move resulted in Renault selling only 16,361 new vehicles in Russia in March, down 64 percent year-on-year, and Renault sold 75,104 units in Russia in the first quarter of this year, down 34.3 percent from the same period last year.
From the perspective of the global market, Renault is also affected by the butterfly effect, in the first quarter of this year, Renault's global sales fell by 17.1% year-on-year, only 550,000 vehicles, which is the lowest quarterly sales of Renault since the 2009 global financial crisis.
The picture shows avtoVAZ models
For this, Renault had to negotiate with the Russian authorities on the future of AvtoVAZ. "Of those who have negotiated with us to withdraw, so far only Renault has been renault. In fact, due to a shortage of funds to maintain the performance or operations of its divisions in Russia, Renault has decided to transfer shares in Avtovaz and Avtoframos (Renault's Moscow automobile plant in Russia). ”
According to Denis Manturov, Russia's Minister of Industry and Trade, Renault will transfer 68% of its entire holdings in AvtoVAZ to NAMI (Russia-specific institute) for a symbolic amount, which has a 5-6 year option, at which time Renault can also choose to buy it back.
However, for now, the focus of Renault Group's development is still focused on electrification transformation.
In July last year, Renault formalized its strategic goal for electrification: by 2025, more than 65% of pure electric and electrified products will be launched; by 2030, the proportion of electric vehicles in the Renault brand portfolio will reach 90%.
In February, Renault undertook a historic acceleration of its electric vehicle strategy, publicly mentioning the possibility of an independent split of the electric business in its earnings report, and planning to integrate its all-electric business and technology into a separate entity in France to accelerate the development goal of 100% electrification in Europe by 2030.
At the same time, Renault is also studying the possibility of integrating internal combustion engine, hybrid engine and transmission projects and technologies into an independent entity outside France in order to tap into Renault's technical and professional potential in this field.
Sell shares to raise funds to grow the electric business
With clear targets, Renault is considering selling part of its stake in Nissan to raise billions of euros to support the electrification transition and the independent listing of its electric vehicle business, as well as ease long-standing tensions in alliance partnerships with Nissan.
In fact, Renault-Nissan's alliance began with the imminent bankruptcy of 1999, when the more powerful Renault funded the rescue of Nissan and obtained 43% of the voting shares of Nissan, while Nissan, as an ally, held only 15% of Renault's un voting shares.
This uneven shareholding ratio was maintained for twenty-three years, during which Nissan has also been hoping to get rid of Renault's control and seek more voice in the alliance, and even in 2020, it broke the news that Nissan launched an emergency plan to consider "partially" separating from Renault and eventually dissolving the alliance completely.
Therefore, when Renault considered selling part of its shares in Nissan Motor, some people familiar with the matter revealed that Nissan Motor may be willing to become a potential buyer and buy back the shares. It is understood that Renault holds a 43% stake in Nissan, worth about 7.1 billion euros, according to Nissan's earnings report, Nissan currently has $15.6 billion in liquidity, which seems to have sufficient acquisition funds.
However, in the industry's view, Renault is unlikely to sell all of its shares in Nissan Motor, because it will weaken the alliance. But if Renault reduces Nissan's stake to 15%, which is the same as Nissan's stake in Renault, Renault could generate a profit of around €4.65 billion at current prices while maintaining alliances.
In this regard, the "steam talk" contacted Renault and Nissan respectively, and the two sides declined to comment. In fact, from an objective point of view, the sale of Equity by Renault is a good time for Nissan to change the proportion of equity, and similarly, the sale of Nissan shares will also help the development of Renault's electrification business, which can be described as killing two birds with one stone.
The two sides also appear to have plans for further discussions. Nissan CHIEF Operating Officer Ashwani Gupta will travel to Paris next week to discuss with Luca de Meo, followed by a closer meeting between Renault and Nissan executives in Tokyo next month.
But before the public news, Renault may also seek a third party to buy its stake in Nissan Motor, and it is reported that Renault has put Geely in the buyer's option. It remains to be seen what the final outcome will be.