Geely to pay US$200 million for a third of Renault Korea as China’s largest private-sector carmaker sets sights on exporting to the US

Renault will sell 34 per cent of its South Korea unit to Geely for 264 billion won (US$207 million)
Renault, which can assemble 300,000 vehicles a year in Busan, is in the middle of a turnaround aimed at increasing margins and separating its EV business

Geely

Reuters

Published: 4:32pm, 10 May 2022

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China’s Geely Automobile will buy just over a third of Renault’s Korea unit for roughly US$200 million, potentially helping it boost US exports, and freeing up funds for the French carmaker to invest in its electric business.

Renault, which can assemble 300,000 vehicles a year in its factory in Busan, South Korea, is in the middle of a turnaround aimed at increasing margins and separating its electric vehicle (EV) business to catch up with rivals such as Tesla.

The French firm’s move to sell the stake to Geely – which owns Volvo Cars and a 9.7 per cent stake in Daimler – follows an announcement by the two companies in January to develop hybrid vehicles for South Korea and abroad, produced at the Busan plant.

For Geely, which has typically grown its business through global partnerships, the deal goes beyond selling cars in South Korea and is a way for the Chinese carmaker to export cars made in South Korea to America, a person close to the company said.

A view of the assembly line of South Korea’s Samsung Motors before it was sold to Renault of France to become Renault Kore Motors on April 27, 2000. Photo: AP

“It is an open door into the US,” said the person who declined to be named because the plans are confidential.

The person said that while the details of how the partnership would work had not yet been sorted completely, Geely might initially use the Busan plant to make electric robotaxis for Waymo, Alphabet Inc’s self-driving unit with which it has an existing supply agreement.

A Zeekr 001 car is on display at Zhejiang Geely Holding’s Zeekr Intelligent Factory in Hangzhou Bay on 15 April 2021. Photo: Daniel Ren

“With the South Korea-US free trade agreement, Renault or Geely would not face tax burdens if they export vehicles manufactured in South Korea to the United States,” said Song Sung-jae, an analyst at Hana Financial Investment.

Song noted, however, Geely would face higher manufacturing costs in South Korea, where labour costs are greater and the auto market is dominated by local champions Hyundai Motor and Kia.

“For Chinese firms, building a successful track record in South Korea can help sell EVs in other emerging markets, as well as Europe and US, which the firms continue to knock the door of, but they are difficult markets,” said Kim Jin-woo, an analyst at Korea Investment & Securities.

Infographic: China's vehicle ventures

Renault owned 80 per cent of the unit at the end of last year. The rest was owned by credit card company Samsung Card, which said in December that it intended to sell its stake but gave no details.

Renault’s decision to sell 34 per cent of Renault Korea Motors for 264 billion won (US$207 million) also comes weeks after media reports the carmaker, the top shareholder in Nissan Motor, may lower its stake in the Japanese company.