Nissan shares slide on reports Renault may sell down its stake in Japanese car maker

The move could raise billions of euros for French car company's shift to electric vehicles

Nissan may consider buying its own stock if Renault sells part of its stake in the Japanese car manufacturer. AFP

Nissan Motor's shares fell the most in six weeks on news that Renault is considering selling part of its stake in the Japanese car maker.

Nissan’s stock declined as much as 4.8 per cent in early trading in Tokyo on Monday, the biggest intraday drop since March 11. Renault shares fell 1.3 per cent in Paris on Friday after Bloomberg reported the potential change in shareholding.

The move could raise billions of euros for Renault’s shift to electric vehicles and ease long-standing tensions with its alliance partner, sources said.

Nissan itself may be willing to buy some of the 1.83 billion shares in the Japanese car maker that Renault owns, sources said. Renault may also seek other acquirers for a portion of its 43 per cent stake in Nissan, the sources said.

Representatives for Renault and Nissan declined to comment.

By paring a stake worth 983.5 billion yen ($7.64bn), Renault would be walking a fine line: trying to rebalance a 23-year-old alliance without unravelling it. A lopsided cross-shareholding structure — Nissan owns just 15 per cent of Renault and lacks voting rights — has been a pain point for factions of Nissan executives going back years.

A sale could help finance major structural change Renault chief executive Luca de Meo began to sketch out in February. The company is considering a break-up and separate listing of its EV business. Its legacy business could then join forces with a partner.

One option would be China’s Zhejiang Geely Holding Group, which controls Volvo Car, the sources said. Renault reached a joint production deal with Geely earlier this year for a South Korean plant, and the two have said they may also co-operate in China.

A representative for Geely declined to comment.

Mr De Meo, 54, was making strides turning Renault around before Russia’s military action in Ukraine all but forced the company to begin exiting its second-largest market. The pullout will be costly: the car maker said it will take a non-cash charge amounting to the €2.2bn ($2.4bn) value of its assets in Russia, which include a manufacturing plant in Moscow. It’s also assessing options for its stake in Lada maker AvtoVaz and may try to transfer ownership to a local investor.

Negotiations to reshape the Renault-Nissan alliance — which haven’t been discussed publicly — could take many months, the sources said.

Renault’s EV carve-out could include Nissan assets. Nissan also would be a partner in the French car maker’s legacy hybrid and combustion-engine operations, they said.

The two companies are working with one another on Renault’s structural overhaul, chief financial officer Thierry Pieton told analysts on Friday.

“Nissan is in the loop,” Mr Pieton said. “This is obviously something that we want to discuss with them.”

Nissan would be in a better position than a year ago to buy back its shares, should Renault decide to sell. The Yokohama, Japan-based company has 2 trillion yen in cash and equivalents on hand, and fiscal year operating profit is on track to be positive for the first time since 2019.

Ashwani Gupta, Nissan’s chief operating officer, will travel to Paris next week for discussions with Renault’s Mr de Meo before a broader meeting between Renault and Nissan’s executives in Tokyo next month.

Tension surrounding the asymmetrical nature of the companies’ ties almost destroyed the alliance following the 2018 arrest in Japan of former chairman Carlos Ghosn. The car makers have since been focused on separate turnaround plans to get them past damage wrought by Mr Ghosn’s ouster and the pandemic.

Negotiations aimed at rebalancing the Franco-Japanese alliance, which also includes Mitsubishi Motors, were held in 2019 but took a back seat to more urgent operational and management issues. They have been kept off the table until now.

Reducing Renault’s stake to 15 per cent, the same level as Nissan’s ownership of Renault, could yield about €4.65bn at current prices. It’s unlikely the Paris suburb-based car maker would sell the entire holding, as that would weaken the alliance.

The operating agreement governing the partnership, known as Rama, may also have to be amended with a change in shareholding, some of the sources said. The accord has long been a source of friction between the partners, as has the French state’s 15 per cent holding in Renault, which comes with double voting rights.