Renault and Nissan Motor have been partners for a long time, but now it seems they want something more solid. The automakers are said to be planning a merger and creating a new entity. There has been no official confirmation of the same and there is no guarantee that such a deal may take place.

However, such a deal would make good sense both financially and strategically. In today’s age of electric and self-driving vehicles, bringing together the resources of both these companies would not only bring them benefits, but would also give them a competitive edge over large rivals like GM, Toyota, and Volkswagen.

Renault shares went up 4.5% during the morning session in Paris and are said to have climbed more than 8% during the day following the news.

Nissan Renault considering merger

Renault has a 43% stake in Nissan whereas the latter possess a 15% stake in its French partner. Although the partnership has provided savings, it has not been fully leveraged due to the composition of the holding rights. It is proposed that shareholders of both the companies will receive stock in the newly merged entity, which could have headquarters in both Japan and France.

If the Formula One engine supplier and the Datsun brand owner were to come together, it would create a huge corporation which would have strength in production, research & development as well as marketing. An automobile company with this kind of size and scale is a compelling one in the current competitive environment.

Renault shares went up 4.5% during the morning session in Paris

Along with its benefits, the deal has its share of bumps. The French government holds a 15% stake in Renault and it may not be willing to trim down or give up its share. The deal would need the approval of both the French and Japanese governments who might differ in opinion over the location of the combined company.

If a merger does happen, Carlos Ghosn, who is chairing both the companies now, would lead the new organization. This is an interesting deal in the automotive industry to keep an eye on.