Renault exit could aid Nissan's turnaround

Renault's potential exit from its partnership with Nissan could speed up Nissan's turnaround. Nissan has sufficient funds to weather the storm, but a lengthy recovery could erode its resources. Renault and Nissan's relationship has drifted, and a cross-shareholding is unnecessary. Nissan can continue cooperation with Renault without mutual holdings. Selling its Renault stake would unlock $2 billion in cash for Nissan.

Nissan Motor Co., Ltd. (NSANY) has announced plans to reduce its ownership stake in Renault SA (RNLSY) to allocate more resources toward the development of new vehicles. The move, expected to net around ¥100 billion at the current market value, underscores Nissan's urgency to pivot toward the electric vehicle (EV) sector, where competitors like Tesla and BYD are rapidly gaining ground.

Under the updated alliance agreement between Nissan and Renault, the mutual shareholdings can be decreased from 15% to 10%, granting each company greater operational flexibility. Any stake sale must be coordinated with the other party and include a right of first refusal. If Nissan sells a 5% stake in Renault, it could raise around ¥100 billion, according to Reuters [1].

Renault has been gradually reducing its stake in Nissan since 2023, following a restructuring of their alliance to ensure a more balanced equity relationship. Nissan, under the leadership of CEO Ivan Espinosa, has introduced a strategic plan titled "Re:Nissan," which aims to cut 20,000 jobs and reduce the company's global assembly plants from 17 to 10 by March 2028. This restructuring comes in the wake of a net loss of ¥670.8 billion for the fiscal year ending March 2025.

Nissan is also planning to raise up to ¥1 trillion through a mix of corporate bond issuance and asset sales to meet upcoming bond repayments and cover restructuring costs. The Zacks Rank & Key Picks for Nissan currently stands at #3 (Hold) [2].

The strategic reallocation of resources through the reduction of its stake in Renault allows Nissan to focus on its EV transition. The proceeds from the stake sale will directly fund Nissan's Re:Nissan revival plan, which prioritizes EV development, including the reimagined 2026 Leaf and the N7 electric sedan. The move reflects Nissan's need to reduce financial dependencies and gain operational flexibility while mitigating risks tied to Renault's underperforming internal combustion engine (ICE) business.

Nissan's current stock price, at 351.9 yen as of Thursday's close, is well below the 400 yen Renault paid in 1999, indicating that the group is in a position to reboot the beleaguered brand. Renault seems unlikely to reciprocate by dumping Nissan’s stock immediately, but the potential exit of Renault could help Nissan kickstart new beginnings.

The risks associated with this strategic move include potential disruptions in shared operations, such as joint manufacturing in India, where Renault's consolidation under Renault could complicate Nissan's export strategy. Additionally, Nissan's $4.48 billion net loss in fiscal 2025 highlights the fragility of its turnaround.

Investors must monitor the execution of Nissan's strategic reallocation. If the freed capital accelerates EV launches and reduces debt, it could catalyze a re-rating of Nissan's stock. However, execution delays, trade policy headwinds, and alliance friction remain significant risks.

References:

[1] https://finance.yahoo.com/news/nissan-considers-stake-reduction-renault-133900123.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3SM0SC:0-renault-exit-could-grease-nissan-s-turnaround/