Alliances and Improved Margins the Way Forward for Automakers - Daimler-Renault-Nissan Alliance

Published: 1 Jun 2010

Alliances/Partnerships

The automotive industry has always strived to reduce costs, and one of the most effective solutions for this is having alliances/partnerships. Automotive alliances/partnerships act as a means of increasing share and improving reach, with the advantages of helping attain economies of scale and augment product ranges. An example of gaining market share or increasing reach would be the Fiat-Chrysler alliance, where Fiat has gained a foothold in North America using the sales network of Chrysler, while Chrysler gained the small engine expertise of Fiat in both diesel and gasoline engines.

With the global economic downturn severely affecting the automotive industry, alliances are becoming a strategic option for companies looking to consolidate their position or, if possible, even achieve some growth. In addition to the corporate level alliances, functional collaborations are increasing all over the globe. Recently, several technology and platform sharing agreements have been forged, enabling companies to reduce product development times and costs. One such example is the development and production of Peugeot 107-Citroen C1-Toyota Aygo, where Peugeot/Citroen/Toyota shared the development costs of Peugeot and the overall manufacturing costs.

Significance of Daimler-Renault-Nissan

The expected annual growth rate of the small car segment is nearly 4 percent to 6 percent over the next decade. The projected rate is a result of the rapidly changing trends in consumer demand, as small, fuel-efficient cars are increasingly preferred to gas-guzzlers. This places the premium carmakers such as BMW, Mercedes and, to a certain extent, Audi at a disadvantage, as small cars usually have lower margins due to their smaller scale.

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