CAN GOOGLE AND QUALCOMM TAKE OVER THE AUTOMOTIVE INDUSTRY?

What follows is a model of how any vehicle manufacturer could choose to become extinct.

At the end of the last century Nissan built vehicles rather well, but in another sense, were totally boring. In effect the company built the type of vehicles its board thought would be good, and its customers simply drifted away. Then something happened – the birth of the Alliance, an end to jobs for life, partnership with a profoundly French company and a long, long line of internationally successful vehicles. A physically small man was pivotal to this – Carlos Ghosn.

Fast forward to now. Luca de Meo is at the helm of Renault, and thanks to a former trade minister – now President Macron – the French government own a slice of Renault. The Government of Japan is not comfortable with France owning a slice of Renault and so in effect always found on the board of Nissan via the Alliance. Meanwhile Nissan products are sliding back into the bad old ways of the 1990s, compounded by taking over the hulk of Mitsubishi.

Nissan was always the biggest part of the Alliance, but not always the most profitable. Right now Nissan still build a few good models, and remains in the black – but Renault is completely and utterly lost. It does not help that the EU wish to destroy the automotive business by starting with the factories in the 27 member states. Renault have discovered their version of Nissan blandness, and cash is getting tight.

Magic

Renault openly consider a future without Nissan but knows they cannot survive alone. Meanwhile Nissan consider the future without Renault, that they have no need for Renault and quite like the financial black hole formerly known as Mitsubishi. Add a side order of Nissan corporate arrogance and hey presto, divorce is on the cards.

Renault knew their main component suppliers such as Auto Châssis International (ACI) and Française de Mécanique (FDM) were going to alter – or go out of business. Unlike Nissan, Renault mainly sells vehicles in Europe:

The same Europe directly taxed internal combustion engine vehicle manufacturers from 2019 …The very same Europe that blocked MHEV, HEV, PHEV as well as lower carbon impact fuels by 2022 … The one and the same Europe that will ban internal combustion powered new cars from 2035 onwards.

Literally, the writing is on the wall

One ‘solution’ is to put all internal combustion powered products into an ‘old co’ and all the pure electric products into ‘new co’. To attract the finance for many new products it is far, far easier with the highly fashionable story from ‘new co’ than the story from ‘old co’, even though it is the latter that still makes a profit. Ford, GM, and others are following this path, whereas Toyota stand firm and resist the fragmentation.

Renault becomes not one but many companies

In early November 2022 Renault launched the latest stage of their cunning plan which has been released bit by bit since the start of the year. It seems there will be three divisions:

Alpine, which moves from making low volume sports cars to premium vehicles – something Alpine has not done before.

Dacia, which is sold in some markets such as South Africa as Nissan and was sold in Russia as Lada, will concentrate on lower cost vehicles.

Renault will be the volume brand, sitting between Dacia and Alpine.

Uh-oh. We can see cracks starting to appear…

The internal combustion engines, transmissions, MHEV, HEV and PHEV systems now live in ‘Horse’, which is a new collaboration with Geely. Translated that means lifting most of the production East, giving Geely another route to internal combustion engines to use in their own vehicles outside the EU market.

The pure electric drive powertrains live inside ‘Ampere’, with the aim of building one million units a year by 2030, rising to half the total production by 2040.

Mobilise, offering some unique products but also trying to serve the short-term access market.

‘The Future is Neutral’ which is the recycling and circular economy unit, which in effect does not really exist today. The target is to get this fully functional by 2027.

The consequences

1. The confirmation of ‘Horse’ means Renault will place all of its internal combustion powertrains, enhanced electric motor transmission and MHEV/PHEV systems into the joint venture company. Reputationally Renault engines have a relatively low build cost but are durable. Even though the Nissan-Daimler link is dead, Daimler still buy their cheapest internal combustion engines from Renault. Geely really wanted this, given they already were adopting the internal combustion engine business from Volvo.
2. The confirmation of ‘Ampere’ gives Renault a clean shot at the type of ESG score that makes attracting capital much easier. The flaw in this part of the plan is if ESG falls out of fashion as fast as it arose, leaving Renault with an almighty headache.
3. The confirmation that Google will be an integral partner for vehicles to external asset communication (buildings, other vehicles, trees…) will not just be an add-on to access vapid social media, but an integral part of data transfer. This places Google deeper into Renault than any other manufacturer to date – and far more difficult to replace should this be necessary.
4. The confirmation that Qualcomm will be the ‘digital chassis’ partner, and as with Google, transforms the SnapDragon architecture from a bought-in Tier 1 service to an integral part of the company. As with Google, this moves Qualcomm from a regular supplier to an integral system supplier.

The result

This is a step beyond anything we have seen before – Geely, for example, build Smart One as a turn-key product, under specific contractual obligations, leaving Daimler to sign an agreement with anyone to cover the next gen Smart products.

In the case of Renault, there does not seem to be a strategy, just panic.

Google and Qualcomm will use Renault to perfect their ‘OEM offering’. This will be the root of ‘Alphabet Mobility’ or ‘Qualcomm Mobility’, not as mere PR but fully fledged vehicle manufacturers.

This reduces any brand as merely a label, and little more. The primary activity and most profitable activities will be taken by ‘partners’. As an aside, Tesla keep most of their suppliers at arm’s length, as do Daimler and Toyota. It is the brand that owns the overall product engineering and IP, not the supplier.

‘Horse’ I predict will be a huge success, but Renault may not see a penny of profit whereas Geely certainly will. ‘Horse’ is key to covering the possibility that the EU Commission and MEPs have to u-turn in the face of the deepest recession for a century, and allow MHEV/PHEV for longer in the EU. In addition, ‘Horse’ will also ensure Renault have access to all the markets not dominated by the EU agenda.

In spite of all of this, the exodus of Renault staff to Stellantis and beyond continues.

You can pull the Renault badge off and put almost any other brand in its place, because much the same story is happening everywhere except China. By the way, China makes 70 percent of all Li-Ion batteries. What a coincidence.

By Andrew Marsh