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Nissan-Renault-M'bishi alliance crisis comes at revolutionary moment for auto industry

TOKYO -- The alliance of Nissan Motor Co., Mitsubishi Motors Corp. and France's Renault SA has been the world's second-largest automaker by unit sales for two years running, and is eating into world No. 1 Volkswagen AG's lead. The Nissan-Renault-Mitsubishi alliance has risen to these heights under the strong leadership of former triple-chairman Carlos Ghosn, but even as the auto industry as a whole faces an epochal shift to electric and autonomous vehicles, the alliance has no apparent strategy for its "post-Ghosn" existence.

The alliance on Jan. 30 announced total global vehicle sales of over 10.75 million units in 2018, up 1.4 percent from 2017. While this was not enough to overtake Volkswagen, which saw sales growth in a number of markets including China, Europe and South America, the gap between the No. 1 and No. 2 spots shrank to just 80,000 vehicles or so.

Carlos Ghosn, now in detention over multiple accusations of financial malfeasance, was the glue that held Nissan, Renault and Mitsubishi Motors together, and he had prioritized unit sales growth across the entire alliance. In 2015, the Nissan-Renault partnership sold some 8.5 million vehicles globally. But after bringing Mitsubishi -- then ailing badly from plunging profits following a scandal over faked fuel economy numbers -- into the alliance, total group sales surpassed 10 million units in 2017.

In the background, however, the alliance has been straining at the seams. In particular, the revelations of rampant vehicle inspection report falsification at factories, and Ghosn's arrest and indictment on allegations he essentially turned Nissan into his own private piggy bank, indicate a serious corporate governance deficit across the group. Now that Ghosn is gone, there is every possibility that the Nissan-Renault struggle over which firm should lead the alliance will get far worse, and it looks likely management instability will continue for some time.

Meanwhile, the worsening U.S.-China trade war and the latter's slowing economic growth have shown the limits of the sales growth strategy. Nissan's sales in China grew 2.9 percent in 2018 to 1,563,986 vehicles -- a record high. However, in the last four months of the year, unit sales actually dropped from the same period in 2017. In the United States, the company had been planning a purchase subsidy scheme to help dealerships boost sales by lowering prices, but the immense cost of the strategy has forced a rethink.

Furthermore, the alliance must deal with a "once-in-a-century" industry-wide technological revolution led by the shift to electric and autonomous vehicles, meaning cutthroat competition not just with traditional carmakers but from new players including tech firms.

For example, Toyota Motor Corp. has already shifted away from striving for big unit sales numbers, and turned to highly proactive joint partnerships with the likes of information technology giant SoftBank Group Corp. The Japanese auto giant is looking to develop a suite of services related to its vehicles, among other projects, reflecting the changing nature of competition in the car industry.

The Nissan-Renault-Mitsubishi alliance has been accelerating its efforts to make similar tie-ups, such as with the U.S.'s Google on internet of things "connected car" technology. It is also considering cooperating with Germany's Daimler AG on self-driving cars.

Nevertheless, some industry experts believe the alliance is late to the party. Senshu University economics professor Yoshiaki Nakamura told the Mainichi Shimbun, "The Ghosn period called for economies of scale, but there was no vision for the future. If there is no strategy with next-generation thinking, then Nissan has no tomorrow. The challenge now is whether the alliance can move ahead with tie-ups with other firms including those in different industries, even while it has no overall leader."

(Japanese original by Naoya Matsumoto and Ryo Yanagisawa, Business News Department)

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