Renault-Nissan Alliance posts synergies of 2.69 bn euros, big gains in emerging markets like India

Paris, June 28, 2013: The Renault-Nissan Alliance has posted record synergies of 2.69 billion euros (Rs 21,245 crore) in 2012, up from 1.75 billion euros (Rs 13,821 crore) in the previous year. This is a 54 percent jump and come as a result of synergies primarily from cost reductions and cost avoidance. Only new synergies – not cumulative synergies -- are taken into account every year.

Formed in 1999, Renault and Nissan enjoy the longest-lasting and most productive cross-cultural partnership in the auto industry. Renault and Nissan collaboration increased worldwide, particularly in emerging markets where both companies are expanding their industrial footprints. The companies sold 8.1 million cars in nearly 200 countries in 2012. “Synergies and greater economies of scale allow Renault and Nissan to compete in an elite tier of the world’s top automakers globally,” said Christian Mardrus, Renault-Nissan Alliance managing director for Logistics and the Office of the CEO. “We expect to generate even more synergies going forward, particularly in emerging markets such as Brazil, Russia, India and China.”

As in previous years, the top contributors to synergies by business unit in 2012 were purchasing (851 million euros/Rs 6,721 crore), powertrain (709 million euros/Rs 5,599 crore) and vehicle engineering (546 million euros/Rs 4,312 crore). Synergies increasingly come from Asia and emerging markets such as Russia, where the two manufacture vehicles and powertrains together at the same plants.

The Alliance’s plant in Chennai, India, for example, is home to the biggest platform-sharing project within the Alliance. The plant, which has an annual production capacity of 400,000 units, produces both Renault (Duster, Fluence, Pulse, Scala) and Nissan vehicles (Micra, Sunny, Evalia) for export and the local market. In Russia, the Alliance builds cars together with AVTOVAZ, Russia’s largest automaker,at the same facility in Togliatti. Last year, the Alliance gained a controlling interest in the maker of the iconic Lada brand through a joint venture with state-owned Russian Technologies.

In South Korea, Nissan will start building the next-generation Rogue at the Renault Samsung Busan plant next year. Last year, the Alliance made significant cost improvements to the manufacturing process before the start of production of the SUV. The improvements will increase production of the Nissan Rogue and will boost efficiency throughout the plant.

Since 2009, all purchasing at the Alliance has been handled by the Renault Nissan Purchasing Organization – the largest common Alliance organisation. Thanks to the 8-million-unit scale of the Alliance, RNPO can negotiate better pricing than small companies could negotiate individually.

Powertrain synergies are derived from the co-development and exchange of engines and gearboxes. Thanks to their historical centres of excellence, Renault specialises in diesel and downsized petrol engines and manual transmissions, while Nissan specialises in natural aspirated petrol engines and automatic transmissions. Vehicle engineering synergies are mainly derived from shared platforms and common parts.

Common Module Family to drive gains

In 2012, the Alliance also began to derive synergies from a new approach called Common Module Family (CMF) which involves the consolidation of both platforms and parts. The CMF approach is a shared system that enables Renault and Nissan to collaborate even more closely on products and is expected to be a major contributor to synergies moving forward.

CMF will gradually be extended to Renault and Nissan models between 2013 and 2020. CMF will be first applied to the compact and large car segments, followed by models in other segments. CMF is expected to generate an average 30-40 percent reduction in entry cost per model and a 20-30 percent reduction in parts cost for the Alliance.