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Renault-Nissan Alliance annual synergies rise 16% to $5.69bn

Sharing engineering, manufacturing, purchasing and development delivers continued benefits to alliance as it is joined by Mitsubishi Motors

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The Renault-Nissan Alliance has reported a 16% increase in synergies for 2016 compared to 2015, with converged operations in purchasing, engineering and manufacturing contributing to a rise in savings.

A statement from the alliance said its members secured savings, generated incremental revenues and implemented cost-avoidance measures through the partnership to the tune of $5.69bn last year, up from $4.89bn in 2015. The converged operations contributed most of the $797m of improvement, it added.

Carlos Ghosn, chairman and chief executive officer of the Renault-Nissan Alliance, said: “The growing cooperation across the Alliance is delivering strong benefits for the members of the Alliance, reflected by the economies of scale, technological breakthroughs and innovations that are being shared between Renault and Nissan. We are on track to realise synergies of $6.26bn in 2018, even before taking into account the contributions from Mitsubishi Motors, our new Alliance partner.”

With the addition of Mitsubishi Motors, which became the third full member of the alliance at the end of 2016, annual sales have reached 10 million units, according to the statement. The addition of Mitsubishi Motors comes two years after Renault and Nissan deepened their partnership by converging four key functions: engineering, manufacturing & supply chain management, purchasing and human resources. Each such function is led by a common alliance executive vice president.

“We continue seeing tangible results of this major convergence,” added Ghosn. “Our growing synergies are helping Renault, Nissan and now Mitsubishi Motors meet their financial objectives and deliver higher-value vehicles to customers in the new era of mobility.”

Mitsubishi Motors is expected to contribute expertise to the Alliance in areas such as plug-in hybrid electric vehicles, pick-ups, light trucks and sports utility vehicles, as well as a strengthened market presence in Asia.

In April, the alliance created a light commercial vehicle business unit for vans and light trucks. The new unit will maximise shared product development and cross-manufacturing, technology sharing and cost-reduction, while preserving brand differentiation among alliance members.

This year, the alliance members are also expected to introduce more technologies in electric vehicles, autonomous driving and connected cars and will increase commonalities in platforms, powertrain and parts to boost competitiveness, said the statement.

The cross-production of vehicles continues to be a major driver of manufacturing synergies. Cross-production allows Renault, Nissan and Mitsubishi Motors to manufacture vehicles in each other’s plants and closer to where they are sold, and to increase plant utilisation, thus reducing fixed costs.

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