With news of falsified emissions tests hitting Nissan's (NSANY) shares in Tokyo trading today, it's fitting that the company's global alliance partner is Renault (RNLSY) . That was the surname of the police inspector in Casablanca, Louis Renault, who declared himself "shocked" to see gambling occurring in Rick Blaine's Cafe Americain at the very moment he was being handed his winnings from his night's wagering.
It's an open secret in the auto industry that real world performance rarely meets that of tests performed in a controlled environment.
Many of those tests are performed while the car is being driven on a dynamometer. Everyone with any auto intel knows that cars in actual traffic won't perform as they do on the "bench" but those benchmark readings are the basis for standardized government reporting.
So, now we will be subjected to a round of kabuki theater with top Nissan execs. It probably won't be unlike the bloodletting that accompanied VW's (VLKAY) emissions cheating scandal. There's no evidence yet that the folks in Tochigi Prefecture were as devious as the executives in Wolfsburg, but these controversies do have a way of spiraling. The Japanese concept of "saving face" will no doubt come into play here, as well, but apologies do get old after awhile.
This news will undoubtedly secure Carlos Ghosn's grip on the Renault-Nissan-Mitsubishi (MSBHY) alliance. News reports in March indicated that Ghosn, a man I used to interact with in my days as a London-based sell-side analyst, was attempting to create a unified corporate structure for Renault-Nissan.
Nissan owns 43.4% of Renault and Renault owns 15% of Nissan. If that were the extent of the tie-up, that would simplify a full merger, but the complication is the French government's 15% stake in Renault. French President Emmanuel Macron has an investment banking background and doesn't seem to be tied to the socialist policies that led Renault to underperform its German peers for decades.
So, Nissan shares are radioactive now, and will remain so until the full facts are detailed. Nissan has hired an outside law firm to investigate -- undoubtedly a long process.
Longer-term, though, a unified Renault-Nissan would have the strong -- and unchallenged -- leader in Ghosn and a strong position in battery-electric vehicles (BEVs) through its production of the Nissan Leaf, which is, sorry Elon Musk, still the best selling electric car in the world.
It is imperative for every global automaker to have a strategy to manage the transformation to fully-fledged mobility companies that produce autonomous vehicles on electric vehicle platforms.
GM (GM) is there, Volkswagen is there, Toyota (TM) is a little behind on BEVs but is focused on hydrogen fuel cell cars (FCEVs,) which I believe to be a superior technology to BEVs. Tesla (TSLA) only makes BEVs, so they have a natural advantage versus the big players who need to transition their powertrains.
It's a crowded space, but a carmaker with no coherent strategy for a future of AVs on electrified powertrains (yes, I am taking yet another shot at Ford (F) here) would be completely uninvestable at this point. Nissan is ahead of that point, and with Ghosn driving hard, I like their chances to remain relevant into the next decade.
So, if Nissan shares go into a spiral, I'll look to scoop them up, but only if the downturn is magnitudes greater than today's 5% pullback.