Carlos Ghosn isn't currently fit to lead Renault following his arrest in Japan, French Finance Minister Bruno Le Maire has said.
Ghosn, who acts as CEO of Renault and chairman of both Renault and Nissan, was placed under arrest in Japan on Monday after he allegedly violated Japanese financial law. The arrest followed an investigation by a select number of people at Nissan.
The Japanese carmaker has said it will recommend that Ghosn be removed from his role and now attention has turned to what position Renault will take.
The French government has a 15 percent stake in Renault, which in turn holds a 43.4% stake in Nissan. French Finance Minister Bruno Le Maire has said Renault should now set up an interim management structure.
"Carlos Ghosn is no longer in a position capable of leading Renault," Mr Le Maire told France Info radio on Tuesday.
Le Maire added that the French government had already investigated Ghosn's tax affairs but had found nothing wrong.
Overnight, shares of Nissan tumbled by 5.45 percent, while Mitsubishi, a third party in the auto alliance, tanked 6.85 percent. At the last check Renault shares were down more than 2 percent in European trade on Monday.
Ghosn joined Renault in 1996, then spearheaded the Renault - Nissan alliance in 2005 and led both firms through a turnaround. In 2016, Mitsubishi's inclusion helped expand the alliance. The three firms together account for one in every nine cars produced around the world.
Attention will now turn to how Renault treats the allegations of financial misconduct laid by both Nissan's executives and Japan's public prosecutor.
The company has confirmed to CNBC it will now meet on Tuesday night and also issued a short statement, defending its alliance with the Japanese firm.
"Pending provision of precise information from Carlos Ghosn, Chairman and Chief Executive Officer of Renault, the above directors wish to express their dedication to the defense of Renault's interest in the Alliance. The Board of Directors of Renault will be convened very shortly," the statement read.
Ana Nicholls, Managing Editor, Industry Briefing at the Economist Intelligence Unit told CNBC's Street Signs on Tuesday that Renault's apparent reluctance to back Ghosn would suggest that the alliance looks set to be protected.
Nicholls said she spoke to Ghosn last week and, coincidentally, discussed how the alliance would be shaped once he stepped down as the most senior executive.
"He said there was obviously other people within the group who had experience on both sides of the alliance who could take over," she said.
Nicholls added that one obvious candidate to take over, at least at Renault, was Thierry Bollore, currently the French firm's chief operating officer.
The autos watcher added that within the overall alliance, the makeup of executives is currently "French heavy" and that could be set for change.