There’s a fun new rumor bouncing around the automotive-industry talk machine, and if true, would-be serious news. The rumor? Stellantis and Renault are going to merge. Number three global automaker Stellantis (ranked by 2023 sales revenue), and number 20 automaker Renault (same), are said to be in discussions that could end with the two carmakers merging into one big happy auto company, ideally sharing development costs and enjoying greater economies of scale.
Is Stellantis Merging with Renault?
There’s just one problem with this story: It probably isn’t true. Stellantis Chairman John Elkann has flat out denied the rumors, which seems to put the story to rest. Still, the idea of the two car companies coming together isn’t entirely crazy. Here’s why:
Renault has found itself in a position of weakness. Though the Renault brand is a strong seller in its home market of France, it’s not especially popular elsewhere in Europe. Plus, Renault’s secondary/emerging-market brand Dacia is stumbling now that carmaker has yanked the marque out of Russia, once it’s strongest market. Renault’s only two other operations—sports-car maker Alpine, and a manufacturing project in South Korea—do not contribute much to the corporate bottom line. And while Stellantis has seen its stock value climb 75 percent in the past five years, Renault stock price has remained stubbornly flat over the same time period.
Renault was further weakened last year when alliance partner Nissan finally balanced the books on a rather lopsided co-ownership arrangement. When the two companies entered into a relationship way back in 1999, Renault was able to take a significantly larger stake in Nissan than that company was able to take in Renault. This because Nissan was struggling at the time, and its stock was trading at a deep discount. After years of acrimony related to the ownership imbalance, the two companies have finally cleared the books, and each now owns roughly 20 percent of the other. While this new arrangement helps to maintain a healthy relationship between the two carmakers, it also means that Renault will see less revenue in the form of Nissan profit moving forward.
This would make Renault an easy target for a takeover, but the rumor whirling around is for a merger, which may seem odd.
Here’s the deal: The French government holds significant ownership stakes in both Stellantis (6 percent) and Renault (15 percent), and seems to be looking for ways to streamline and make more efficient the operations of the two companies.
And while it may seem odd that the French government owns significant stakes in publicly held corporations—a thing which does not happen much here in the U.S.—remember that the State of Lower Saxony (basically Bavaria) claims a significant 11-percent state in the Volkswagen Group.
But while French bureaucrats might see the wisdom of a Stellantis/Renault merger, the deal doesn’t actually offer much for the former. Already laden with 14 brands, Stellantis isn’t looking for new market segments to conquer, and Renault doesn’t offer much in the way of geographic presence.
Remember that Stellantis was formed by the merger of Fiat Chrysler with France’s Groupe PSA. And, remember, too, that Peugeot, a PSA brand, already has a strong presence in France. So, unless Stellantis is seriously interested in discount-brand Dacia, there is little in the Renault portfolio for Stellantis to exploit.
Now, if Renault had a meaningful presence in China–which it doesn’t—a deal could make some sense to Stellantis, as the latter has struggled in that market.
We don’t see much value in a Stellantis/Renault merger, or take over, or partnership, but the rumor is still fun to contemplate. But we have to ask: Wouldn’t a consolidation of the two companies, both of which maintain large presences in France, ultimate mean fewer jobs, and ultimately less business, in the country?
At this point, we’re going to call any rumors related to this merger just the careless ramblings of a few French bureaucrats during a morning break over coffee and croissant. Certainly, an idea worth contemplating, but ultimately not a very good one.