Renault Loses 9.5 Billion Euros Due to Nissan

Renault must change the way it accounts for its stake in Nissan. While the figures are impressive, the operation is not.

Until now, Renault calculated the value of its participation in Nissan based on the financial results of the Japanese manufacturer. From now on, it will directly rely on the value of its stock on the market. This change follows international accounting rules. It also reflects an evolution in the way Renault exercises its rights within the alliance with Nissan.

However, the stock of the Japanese brand has lost nearly 40% in a year. This change in valuation will consequently lead to an accounting loss of 9.5 billion euros in Renault’s accounts. This may be alarming, but it is important to understand that this is not a loss of actual cash. Renault has not lost any cash, and it does not affect the dividends paid to shareholders.

In fact, this loss arises from the fact that Renault had valued its stake in Nissan at a higher price than the current stock market value. By updating this value, the discrepancy is recorded in the accounts.

A hidden strategy to devalue Nissan?

One might think that Renault is trying to devalue Nissan. But in reality, it is just an accounting update, transparent, based on international rules. Renault is merely reflecting the true value of Nissan as perceived by the market.

In the future, the rises or falls in Nissan’s stock price will no longer directly affect Renault’s results but will be recorded in shareholders’ equity. This corresponds to the total resources of the company, generally reflecting its financial value. Therefore, the most penalized in this situation is not Nissan, which is already directly suffering from the drop in its stock price, but Renault.

This change does not call into question the cooperation between Renault and Nissan as of today. Both groups continue to work together on industrial and technological projects.

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