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On The Case
Lex: Renault/Nissan
Date of publication - 22 May 2001
Nissan and Renault are increasingly two sides of one coin. As the Japanese carmaker reported sparkling results, Renault, which owns 36.8 per cent of it, slipped out a profits warning. The broad pattern was already expected - a resurgent Nissan partly offsetting a Renault slowdown - but those
trends now look more pronounced. For both groups, however, new models are key.
Renault, at a point in its cycle when it has lots of older models, is losing share to the likes of Peugeot Citroen, which has several slick new ones. That leads to incentives to keep customers buying, which hit margins hard. The big question is whether the new Laguna, a facelifted Clio later this year and the luxury Vel Satis early next can stop the decline. If not, Renault has a
yawning gap before the new Megane and Scenic at the end of 2002.
That puts more pressure on Nissan's contribution. But evidence so far suggests Carlos Ghosn, president, can deliver on his new targets. After spectacular cost-cutting, Nissan's rising operating margin is overtaking Renault's. Raising it from 4.75 per cent to 7-8 per cent by 2006, however, requires cost efficiency combined with some hit models. At least 22 new or revamped
models in 2003-6 will maximise its chances.
They also leave Nissan with some of the best growth prospects among Japanese carmakers. Renault, by contrast, lacks short- to medium-term momentum. But strip out the market value of its Nissan and Volvo stakes, and the core business looks distinctly undervalued. That should provide some support for the price.
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