Blog Post

Daimler-Renault Deal: Birth of an 800-Pound Green Car Gorilla?

French-Japanese allies Renault and Nissan (s NSANY), and German automaker Daimler AG (s DAI), have a deal in the works to cooperate on development of hybrid and electric vehicle tech, and to share platforms for small cars. And according to multiple reports today, the trio will announce a final agreement on the long discussed tie-up as early as Wednesday. 

Given the Renault-Nissan Alliance’s aggressive investments in the electric vehicle and battery market (they’re aiming for nothing less than domination of the global EV market), combined with Daimler’s engineering expertise and investments in electric car startup Tesla Motors and battery maker Evonik, how might a Renault-Nissan-Daimler alliance shape the nascent market for plug-in vehicles?

As the Wall Street Journal explains, the expected tie-up would give Daimler access to Renault and Nissan’s “fuel-efficient, low-emission small engines; small-car platforms; and Renault’s expertise in electric power trains and cost cutting,” while the French-Japanese pair could gain “access to Daimler’s hybrid-engine technology and electronics and quality expertise.

One of the most significant effects may be in helping to reduce costs. As Renault-Nissan chief Carlos Ghosn put it to reporters at this year’s Geneva Motor Show, “The name of the game is scale and co-investments and sharing technologies.”

Automakers are looking to cut costs far and wide following the industry’s downturn. But it’s particularly important for the success of plug-in vehicles. Pricing for the earliest models of these cars is coming in at the high end for mass market vehicles — a challenge for mainstream adoption. Nissan has priced its LEAF electric sedan at about $33,000 — less than $5,000 above the price of the average car sold in the U.S. — but models like the Chevy Volt from GM (s GM), Model S from Tesla, for example, will carry sticker prices of $40,000 and up. Despite government incentives designed to help bring these cars within reach for a larger portion of consumers, costs will likely have to come down in order for them to grab a significant share of the mainstream market.

Evonik Chairman Werner Müller with Daimler Chairman and Mercedes-Benz Chief Dieter Zetsche (courtesy Daimler).

While Daimler has previously touted its registration of more than 600 patents related to battery-powered vehicles over the last three decades, the company has over the last year or two shown a heightened sense of urgency when it comes to carving out a piece of the nascent plug-in vehicle and battery market — a potentially multibillion-dollar opportunity by the company’s estimates.

The German automaker has set up joint ventures with Evonik Industries to produce lithium-ion battery cells and packs, and last spring took a 10 percent stake in electric carmaker Tesla Motors (Daimler later sold a portion of its stake to Abu Dhabi’s Aabar Investments). In addition, Daimler has picked Tesla to supply up to 1,400 battery packs and chargers to support a trial of electric Smart Fortwo models in Europe.

As Tesla noted in its most recent filing with the SEC (an amendment to its IPO registration), it’s now negotiating agreements for Daimler to provide “access to various parts, automotive support and engineering for the Model S,” and is in talks with Daimler “regarding various other areas of strategic cooperation.” However, it’s clear at this point that the startup is hardly a shoe-in to expand its supply deal beyond the 1,400-pack trial.

A big reason for the Tesla deal, Daimler’s Thomas Weber (who is responsible for group research and Mercedes cars development) said last spring, was to get an electric car on the market as soon as possible, faster than it could with internal development. As Daimler racks up more and larger partners in EV development and manufacturing, from Evonik to BYD and now Renault-Nissan — which is ready to start selling the Nissan LEAF this year — smaller startups like Tesla may have a tougher time getting in on the action.

3 Responses to “Daimler-Renault Deal: Birth of an 800-Pound Green Car Gorilla?”