Renault-Nissan-Mitsubishi increases annual synergies by 14 percent to $6.7 billion

The Alliance benefited from cost savings, incremental revenues and cost avoidance through collaborations in 2017

Automotive alliance, Synergy, Renault-Nissan-Mitsubishi, Economies of scale

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Renault-Nissan-Mitsubishi (The Alliance), the world's largest automotive alliance, has reported a 14% increase in annualized synergies to $6.7 billion, up from $5.8 billion in 2016, owing to growing cost savings, incremental revenues and cost avoidance.

The latest synergies reflect the economies of scale realized by the Alliance members, which reported total sales of more than 10.6 million vehicles for 2017. Under the Alliance 2022 mid-term plan, the member 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%.

Carlos Ghosn, chairman and CEO of Renault-Nissan-Mitsubishi, said: “In 2017, the Alliance turbo-charged 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 utilization 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 $11 billion by the end of 2022.”

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 Organization (formerly RNPO) generated significant cost reductions and avoidance through centralized sourcing of parts, equipment and tooling, global contract negotiations, and common utilities sourcing at facilities around the world.

In manufacturing, ongoing synergies were also realized through vehicle production on shared platforms such as the Datsun Redi-Go 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 maximized cross-development and cross-manufacturing, delivering synergies in costs and technology in vehicles such as the Nissan platform based one-ton pick-up truck by Renault and Daimler. This allowed the extension of Alliance market coverage to 77% with a total range of 18 models across Renault, Nissan and Mitsubishi Motors.

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