In my last blog entry discussing Geely’s acquisition of Volvo Cars from Ford, I highlighted a new trend that was starting to emerge across the global automotive industry.  Far Eastern automotive companies, keen to get a better understanding of western automotive technology, were starting to embark on acquiring western automotive companies. Meanwhile the extensive M&A activity that has seen many western car manufacturers change ownership over the past few years, is now moving into a phase whereby western car manufacturers are looking instead to establish strategic alliances with key partners around the world.

On 7th April 2010, Daimler AG, Renault and Nissan announced a new alliance which will see Daimler take a 3.5% stake in Renault-Nissan and Renault and Nissan will each take a 1.55% stake in Daimler.

So now for the history lesson!

In 1998 Daimler AG wanted to find a way of expanding their global manufacturing footprint and decided to acquire Chrsler in North America. Daimler started to manufacture their cars in North America and the Chrysler brand re-established itself in Western Europe. However in terms of sharing technology and platforms the acquisition was not very successful for Daimler and so Chrysler was divested in 2007 and the business was acquired by Cerberus before being acquired by Fiat in 2009.

Today, Renault has a 44.3% stake in Nissan and Nissan has a 15% stake in Renault. The alliance has been very successful and almost serves as a model for how two car companies can work together to in this case design high volume, small cars for global markets. Even during the most recent economic downturn, Renault-Nissan was in a very strong position to offer a variety of low cost cars to various markets around the world. One of the most important new markets for Renault-Nissan is Russia and they recently agreed an alliance with Russia’s AutoVaz. AutoVaz is Russia’s largest car manufacturer, with Lada being their main car brand, but the company as well as the whole industry has suffered in recent years, with minimal government investment across the industry and limited new car sales.

To address this issue and in order for Russia to be taken more seriously in the global automotive industry, they have now started a number of projects to boost investment in Russia’s automotive industry. Firstly the Russian government will be investing $6Billion into the industry over the next few years.  Secondly the Russian government has encouraged Renault-Nissan to invest in a new partnership with AutoVaz. Now why would Renault-Nissan be interested in this alliance, well because they expect to win nearly 40% of the Russian car market by 2015.  Renault-Nissan has successfully managed to secure first mover advantage in what could be a very large automotive market in the near future.


Finally, on the back of the new alliance AutoVaz has agreed to sponsor Renault’s Formula One team in order to provide greater awareness of their Lada brand. A strange move you might think, not really when you consider that after the Olympics, Formula One is the most watched sport on television and has a global audience of 600 million people watching each race of the Formula One calendar. Many car manufacturers have used Formula One to showcase new automotive related technology and I am sure the Russian government and in particular Lada will be using this as a platform to build global awareness of their brand and the Russian industry as a whole.

So I think it is quite clear to see that Daimler
has a lot to gain by partnering with the Renault-Nissan alliance, here are my thoughts
on what the alliance will bring to Daimler specifically:-

• Access to valuable, next generation small car platforms that could be used for small Mercedes based city cars

• Ability to incorporate Renault-Nissan’s electric vehicle technology into their future Mercedes car designs. Mercedes, compared to the other car manufacturers, has been very quiet with their electric vehicle plans, limiting any press releases on plans for their hybrid vehicle technology.  Renault-Nissan is one of the first high volume manufacturers to announce a new electric vehicle called the Leaf which will be built in the UK. These cars will utilise state of the art powertrain and batteries which will be assembled at a new battery plant near to the Nissan factory in Sunderland in the North East of England.

• Finally, how many car manufacturers would not want to have access to an emerging car market such as Russia?, Daimler will be able to leverage the alliance with Renault-Nissan to get more of their Mercedes cars in to the Russian market. Who knows, perhaps we will start to see more Mercedes limousines out numbering Russia’s infamous Zil limousine, something I have always seen as a throw-back to the last cold war.

So I think that this particular alliance would be of immense benefit to both Daimler and Renault-Nissan, personally I think Daimler has more to gain out of this alliance than Renault-Nissan but increased use of shared platforms, components, distribution networks and possibly sales and support organisations will certainly be of value to both companies. In addition, Nissan’s Infiniti brand will be supplied with Mercedes petrol and diesel engines in the future which will help to push the Infiniti brand more up market to compete with the likes of Audi and BMW. This is especially important for Infiniti as they are currently launching their brand across Europe.

It will be interesting to see how Daimler gets on with this alliance following their relatively unsuccessful attempts to merge with Chrysler, but I think times are different now, economies are just starting to recover, consumers will have increased buying power once increased credit hits the markets and most importantly of all, governments around the world realise how important the automotive industry is to helping grow their respective economies once again.

I keep hearing people say that the automotive industry is dead, I strongly disagree and I think we are now at the beginning of a new and exciting era for the global automotive industry.

Alliances such as this, versus full blown merger and acquisition activity will mean that companies will have to have a slightly different approach to managing their B2B environments. Yes there will be consolidation that can be achieved with logistics and distribution activities, but integrating B2B activities on the supply side is slightly more difficult to achieve. This is especially true when automotive companies may want to keep some aspects of their operations at arm’s length to an alliance partner. So I think with the increasing trend for more alliances across the automotive industry there will be an increasing demand for secure, collaborative B2B platforms that still allow these companies to remain independent from each other. I will discuss B2B in relation to automotive specific alliances in a future blog entry.

This entry was posted on Wednesday, April 7th, 2010 at 7:34 am and is filed under automotive, AutoVaz, B2B, Daimler Renault Nissan Alliance, Driving B2B by Mark Morley, EDI, ERP, General Interest, GXS, Lada, Logistics, Mark Morley, Russia, Supply Chains. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.