Chinese automaker Zhejiang Geely Holding Group plans to buy a 34% stake in Renault Korea Motors for 264 million won, or $207 million.
Renault Korea will issue 45.4 million shares at 5,818 won ($4.56) per share to Centurion Industries Ltd., the Geely subsidiary investing in the South Korean automaker. Renault will remain the company’s largest shareholder after the investment with a 34.02% stake, while credit card company Samsung Card will retain its 20% share.
Serving two masters
The current deal serves both company’s sales strategies. While Renault Korea feels that there’s room for market share expansion, especially given Hyundai and Kia’s dominance, the investment by Geely provides Renault with cash for electrification as it pursues a greater share of the Chinese market in concert with Geely. Renault recently ended its Chinese joint venture with Dongfeng.
For Geely, it allows the automaker to produce a car in South Korea that not only could be sold in South Korea, it could also be exported to the United States. Given U.S.-South Korea free trade agreement, neither Renault nor Geely would face taxes for exporting cars to the U.S., opening the door for Geely to sell cars under its own brand in America — or one of its other brands.
Not their first joint venture
The two companies announced in January they plan to develop a hybrid model, with Renault supplying the design. Renault Korea will handle technological development, and Geely will supply the hybrid system and the car’s Compact Modular Architecture (CMA) platform.
The CMA platform is already in use by Geely, which has sold close to 1.3 million vehicles that use the platform. Some of the cars that employ the platform include the Polestar 2; Volvo XC40 and C40; Lynk & CO’s 01 and other Chinese-market vehicles. It’s designed to accommodate internal combustion, hybrid, plug-in hybrid and battery electric powertrains.
The new vehicle would be built at Renault Korea’s Busan plant, which can build 300,000 vehicles annually, and production would begin in 2024. The car would be just one of the vehicles planned under the joint venture.
South Korean market share
The move would increase cooperation between the two automakers in a market where Hyundai and Kia held a 91.6% market share in April. They were followed by Ssangyong Motors at 4%, GM Korea at 2.5% and Renault Korea, in fifth place, at 1.9%.
Among the vehicles the company sells are the compact Renault Arkana and midsize Renault Koleos — both SUVs.
In 2021, Renault-Samsung, which sells European-based Renault models in South Korea, retailed 57,480 units, a 36% decline from 2020. Renault has been building vehicles in South Korea for more than two decades, selling them through Renault-Samsung, a local brand in which Renault holds an 80% share, with Samsung Group holding the remaining stake.
Part of previously announced plans
Geely is the parent company of Volvo Cars, electric vehicle brand Polestar; Smart Automobiles, Lotus Group and subscription-based Lynk & CO. It also holds a 9.7% stake in Daimler and owns the London Electric Vehicle Co.
Renault maintains its long-running alliance with Nissan and Mitsubishi Motors, although it is exploring spinning off its electric business through an IPO in 2023 as it plans to separate its electric and internal combustion engine vehicle divisions.
Renault is also contemplating selling a portion of its stake in Nissan. Renault owns 1.83 billion shares, or 43%, of Nissan, a stake worth €7.1 billion, or more than $7.6 million. In contrast, Nissan owns 15% of Renault and lacks voting rights, even though the French government owns 15% of Renault, yet has double voting rights.
Renault reported a net profit in 2021 of €888 million, or $1 billion, after the previous year’s €8.01 billion loss and a €141 million loss in 2019. But the company faces the daunting task of transitioning to electric propulsion. The Renault-Nissan-Mitsubishi Alliance previously announced that it will invest nearly $26 billion to bring 35 battery-electric vehicles to market by 2030.