TOKYO — On the surface, the negotiations over the Renault-Nissan alliance reboot are about preparing for the future by creating a next-generation electric vehicle spinoff that both partners will invest in.
But dig deeper, and the delicate talks involve another technology that is seemingly oh-so-yesterday: Old-school internal combustion engines are front and center in this bold EV overhaul.
After 20 years of working together on common technologies, partner Renault intends to cleave its internal combustion assets into a separate company that would stand alongside its newfangled EV business. And to do that, Renault and Nissan face the task of divvying up their shared intellectual property. One important question is how to handle key internal combustion systems.
It matters because — despite the promise of EVs — gasoline- and diesel-burning vehicles are still expected to account for huge swaths of global auto sales for a long time.
Nissan has a lot of cutting-edge technology, such as its e-Power hybrid system and its turbocharged variable compression ratio engines. Those systems will have much longer legs than the sunsetting combustion technology Renault wants to spin off.
“You still have enormous market potential for ICE in the next 20 years,” said one official familiar with the alliance talks, who spoke on condition of anonymity because of the sensitivity of the negotiations. “Many, many countries are still not ready to embrace electrification.” Often overlooked in the EV mania is that “dinosaur” combustion technologies will remain potent revenue streams. Even as regions such as Europe target zero emissions from vehicles by 2035, growing markets in Africa, Asia and the Middle East won’t shift that fast.
Even the U.S., China and Japan will remain important combustion markets for Nissan for quite some time, one person involved with the discussions said. “Definitely, our internal combustion can be more competitive,” the person said. “We need to keep investing, except in Europe.”
S&P Global Mobility predicts that pure EVs will account for only about 40 percent of global production volume in 2030, meaning 60 percent of the market will still require engines.
Under the new alliance plan now taking shape, Renault would split off its EV assets into one future-oriented company called Ampere. Renault would hold 51 percent and Nissan up to 15 percent.
Just as Elon Musk’s company takes its name from the electrical engineer Nikola Telsa, the proposed French EV company channels the memory of electromagnetism pioneer André-Marie Ampère.
Meanwhile, Renault’s internal combustion assets would be put into another company known internally as Horse, people familiarwith the discussions say.
The maneuver mirrors a trend rippling through the industry, as carmakers shift engine and EV activities into separate companies or even separately listed spinoffs. Ford, Volvo and Mercedes are among those recently weighing such a restructuring of their businesses.
In May, Nissan COO Ashwani Gupta, the man leading talks with Renault, said it was too soon for Nissan to decide on possibly cleaving off its own EV business like Renault’s proposed EV spinoff. He said Nissan sees merit in keeping its own EV technology bundled with the rest of its portfolio because Nissan is a full-lineup player in all the world’s major markets, including those that still rely heavily on internal combustion.
“It is too early to consider because of our diversified market portfolio and diversified product portfolio,” Gupta said at the time.
Nissan said pure electrics are expected to generate about 40 percent of its global sales in 2030.
In February, Gupta confirmed that Nissan will stop developing internal combustion engines for Europe because of that market’s shift to demanding Euro 7 emissions standards in 2025.
Partly for that reason, Nissan isn’t expected to invest in Horse.
But prospective rivals are, including Chinese auto giant Geely Automobile Holdings. Another potential investor is Saudi Aramco, the Saudi Arabian oil and gas behemoth.
Nissan may balk at sharing the alliance’s top-shelf tech with potential competitors.
Renault has been circling closer to Geely. Last year, Renault skirted Nissan and its local partner in China to partner with Geely instead. Geely later took a stake in Renault’s South Korean unit, amid speculation Geely will build Lynk & Co. hybrids there for export to the U.S.
“All common works over the past 20 years of the alliance are under review, one by one, to see what we can put into it,” the person familiar with the negotiations said of the Horse portfolio.
One technology that Nissan is certain to want to keep out of the deal is its e-Power electric-gasoline hybrid system. But the partners’ jointly developed diesel engines for Europe? Nissan is not likely to care much anymore.
Despite the explosion of EV startups in China, that country’s mainstay automakers are still seen as lagging in cutting-edge combustion technologies. But as players such as Geely, Chery, SAIC or Great Wall make inroads into overseas emerging markets, they will need to up their ICE game.
Japan’s carmakers are often criticized as EV laggards. But because they excel in highly efficient, low-cost, reliable engines, the Japanese — including Nissan — could still scoop up a lot of the world’s lingering business for internal combustion as other manufactures leave the scene.
“Manufacturers that are strong in internal combustion, particularly Japanese manufacturers, may supply those cars to manufacturers that are dedicated to EVs,” Masatoshi Nishimoto, a principal research analyst at S&P Global Mobility, said at a Sept. 29 automotive conference in Tokyo. “The internal combustion business will not grow in volume, but that market will be rebuilt. So this is going to be an opportunity for manufacturers who make internal combustion cars.”
The alliance rework aims to also rebalance the cross-shareholdings between Renault and Nissan, ushering in a new era some are calling Alliance 2.0. Renault could reduce its 43 percent stake in Nissan to 15 percent, while Nissan keeps its current 15 percent stake in Renault.
People involved said no final decision has been reached.
The reshuffling would mark the first major overhaul since Renault saved Nissan from near bankruptcy in 1999 by taking a controlling stake in the then-flailing Japanese blue chip.
Leveling their cross-holdings could alleviate strained ties between the companies, especially in the wake of the ouster of former Alliance Chairman Carlos Ghosn following his arrest in 2018.
An update may also include a more transparent corporate governance accord to replace the opaque Restated Alliance Master Agreement, or RAMA, that has also been a bone of contention between the partners.
Renault and Nissan could announce a deal as early as Nov. 15, according to people familiar with the discussions.
That would come just days before the fourth anniversary of Ghosn’s arrest at Tokyo’s Haneda Airport over allegations of financial improprieties, a takedown that nearly derailed the alliance he created and held together for nearly two decades.
Nissan’s ¥15.5 billion ($104 million) civil case against Ghosn ground through another hearing in Japan on Oct. 21. Ghosn lawyer Nobuo Gohara continued to petition the Yokohama court to compel Nissan to present its internal investigation of Ghosn’s alleged financial misconduct.
The probe underpins the charges against Ghosn but has not been shared publicly in court.
“It is the key evidence supporting the foundations of their argument,” Gohara said. “It is strange that Nissan hasn’t presented such an important document as evidence for two years.”
Ghosn, who denies any wrongdoing, jumped bail and secretly fled Japan to Lebanon in December 2019, rather than stand trial for a criminal case in Tokyo.
The long-running civil case against him, proceeding at a snail’s pace, will resume Jan. 20.
Naoto Okamura contributed to this report.
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