Renault and Nissan may merge to take on Volkswagen, Toyota

Renault and Nissan plan to merge and form a new company. The two companies have been sharing technologies under their alliance and now they want to further strengthen their association. In the wake of technologies coming together, especially that of Electric Vehicles, the two companies want to make a single corporation. Renault currently owns 43 percent of Nissan while the Japanese carmaker has a 15 percent stake in its French counterpart.

Carlos Ghosn, the current chairman of both companies would be heading this new company. A deal would end the current alliance between the companies and marry them as one corporation, is what is learnt by people in the know.

It is a no-brainer that a merged company of the two giants would be taking on Volkswagen AG and Toyota Motor Corp. head on. There would be better pooling of resources including autonomous driving and car-sharing services. While the alliance of Renault and Nissan has brought savings, their ownership structure differs and this limits the companies from reaping full benefits from their alliance.

As per Janet Lewis, an analyst, “Size matters in the auto industry,” “The concern has always primarily been the French government, and somewhat Japan, because both France and Japan like to keep their national champions.”

Nissan is likely to offer stock in the new company to Renault shareholders. Nissan shareholders would also receive shares in the new company in exchange for their holdings. The headquarters will be built in both Japan and France. Renault shares have risen to 8.3 percent, reaching the highest level in more than a decade.  Nissan shares are down nearly 2 percent over the past year, giving the company a valuation of 4.6 $43 billion.

The two companies coming together would surely be heavy competent to Volkswagen and would also aim and becoming the largest manufacturer. It would be exciting to see if this materializes in the near future.

Source: Bloomberg