The fact that Renault holds three times higher percentage of Nissan shares than the Japanese holds of the French automaker has been a long-standing source of discomfort in their 20-year alliance and they have finally taken steps to remove the pebble.

In a move aimed at better competing in the rapidly evolving auto industry, which is shifting towards electrification and automation, Renault has agreed to reduce its stake in Nissan.

The partners will each retain a 15% cross-shareholding, with Renault transferring the remaining stake into a French trust for coordinated sale at a commercially viable time. The plan awaits final approval from both companies’ boards.

Renault and Nissan’s move to address their power imbalance has been in the works since early 2022. The agreement will resolve long-standing concerns from Nissan executives in Japan. Renault holds a 43% stake with voting rights, while Nissan holds a 15% stake in Renault without any voting rights, despite producing more cars.

Some have even suggested that the Renault-Nissan shareholding tension and power imbalance was partly triggered the arrest and subsequent trial of former alliance CEO, Carlos Ghosn, in 2018.

Ghosn, who was seen as the driving force behind the alliance, was accused of financial misconduct in Japan, leading to his departure from both companies and further exacerbating the power struggle between Renault and Nissan.

The rebalancing of shares between the two companies is seen as a step towards addressing these long-standing issues and moving forward as a united front in the rapidly changing automotive industry.

The deal is also crucial for Renault CEO Luca de Meo to proceed with his own strategy of splitting into 5 different units, including Ampere, and strengthening ties with other partners such as Geely Holding in China and chipmaker Qualcomm.

It’s not clear if raising additional funds informed this decision to divest in Nissan but it is generally understood that the traditional auto sector is scrambling to invest in the transition to electric vehicles

Renault, Nissan and their junior partner Mitsubishi Motors have further solidified their commitment to the alliance by announcing plans for collaborations on specific projects, such as in India, South America, and Europe.

Nissan will also invest in Renault’s upcoming electric vehicle and software subsidiary, Ampere, with the goal of becoming a strategic shareholder. The re-balancing of the capital structure is seen as a positive step by industry experts, as it helps maintain synergies within the alliance while providing opportunities for growth and better capital allocation for both partners.

According to Jefferies analyst Philippe Houchois, ‘A re-sized capital structure should help keep the alliance viable, maintaining synergies and opening up strategic opportunities on both sides. Renault fell 0.7 per cent in early Paris trading, while Nissan pared earlier gains to fall slightly.