Renault Optimistic About Nissan Partnership and Minimal Tariff Impact

During its most recent analyst call on April 24 ("S&P Capital IQ transcript"), Renault mentioned that it has reached a consensus with Nissan on a number of issues.

Previously jointly owned by Nissan and Renault, Renault intends to fully acquire control of an Indian automotive company. Additionally, they will both have their minimum cross-holdings as part of their alliance reduced by 5 percentage points (or "percentage points") to 10%.

36 percent of Nissan's shares are owned by Renault ("source: S&P Capital IQ"). This is made up of a 19% indirect interest held through a trust and a 17% direct stake.

Only Renault's 17 percent ("direct") holdings are subject to the above-mentioned revised cross-shareholdings floor.

According to a Bloomberg report last month, the chairperson of Renault is rumored to be leaving Nissan's board. The former may have less financial interest in the latter as a result of this.

This is approximately $0.6 billion, or 4% of Nissan's market capitalization, assuming Renault monetizes a 7% stake in the company. One-off cash distributions resulting from this is a possibility.

In addition, after Nissan left, Renault increased its ownership of "RNAI" ("Renault Nissan Automotive India") in India from 49% to 100%.

The potential of the Indian auto industry and Renault's presence are not aligned.

In 2024, Renault's percentage of local auto sales was a meager 0.9%. India was the company's thirteenth-largest geographical division at the time.

On the other hand, this country is one of the top three auto markets in the world.

Presently, RNAI's factory is running at a less than 25% utilization rate, which is below ideal. As a wholly owned subsidiary, it will enable Renault to increase production. Over time, this should enable the business to increase its footprint in the Indian market.