Renault-Nissan-Mitsubishi Alliance synergies grow to 5.7 billion euros in 2017

The Renault-Nissan-Mitsubishi Alliance today reported a 14 percent increase in its annualised synergies to €5.7 billion (Rs 43,570 crore) in 2017 compared to €5 billion (Rs 38,220 crore) in 2016, on the back of the world’s largest automotive alliance benefitting from growing cost savings, incremental revenues and cost avoidance.

The Alliance states that the latest synergies reflect the economies of scale realised by the members, who reported total sales of more than 10.6 million vehicles for 2017 – becoming the world’s largest automotive group in terms of sales of passenger cars and light commercial vehicles (LCVs).

“The Alliance has a direct, positive impact on the growth and profit of each member company,” said Carlos Ghosn, chairman and CEO of Renault-Nissan-Mitsubishi. “In 2017, the Alliance turbocharged the performance of all three companies including Mitsubishi Motors which saw its first full-year of synergy gains.”

“We expect to generate growing synergies in coming years as the Alliance accelerates convergence through increased utilisation of joint plants, common vehicle platforms, technology-sharing and our combined presence in mature and emerging markets. We reaffirm our synergy goal of more than €10 billion (Rs 76,440 crore) by the end of 2022.”

As part of the Alliance 2022 mid-term plan, the companies forecast to sell more than 14 million vehicles by the end of the plan, of which 9 million will be built on four common platforms including electric and B-segment vehicles, and extending the use of common powertrains from one third to 75 percent of the total.

Through the converged engineering function, the Alliance member companies share R&D costs and investments, which increases their competitiveness. For instance, Nissan and Mitsubishi Motors joined forces last year to develop the next generation of Kei cars.

In 2017, the Alliance Purchasing Organisation (formerly RNPO) generated significant cost reductions and avoidance through centralised sourcing of parts, equipment and tooling, global contract negotiations, and common utilities sourcing at facilities around the world.

Highlights of new synergy include:

- The adoption by Mitsubishi Motors of Nissan Sales Finance and Renault RCI Bank and Services capabilities;

- Benchmarking between Nissan and Mitsubishi Motors in the ASEAN region;

- Shared spare parts warehouses between Renault, Nissan and Mitsubishi Motors in Europe, Japan and Australia.

The Alliance states that even in manufacturing, ongoing synergies were also realised through vehicle production on shared platforms such as the Datsun Redigo and Renault Kwid, and through cross-manufacturing activities such as Renault Alaskan production at the Nissan plants in Cuernavaca, Mexico and Barcelona, Spain.

Costs associated with vehicle transportation were significantly reduced in 2017, as Nissan and Mitsubishi Motors combined shipments of finished vehicles from plants in Thailand to their respective dealers.

The creation of the LCV converged business unit in 2017 maximised cross-development and cross-manufacturing, delivering synergies in costs and technology in vehicles such as the Nissan platform based one-tonne pick-up truck by Renault and Daimler. This allowed the extension of Alliance market coverage to 77 percent with a total range of 18 models across Renault, Nissan and Mitsubishi Motors.

“Deeper convergence and increased synergies will cement the sustainability of the Alliance for the long term,” added Ghosn.