Chinese firm Geely Automobile is set to buy just over one third of Renault’s Korea unit for approximately $200 million, reportedly to pave the way for increased US exports.
The decision follows an agreement between the two companies in January to work together developing hybrid vehicles, and does not come entirely out of the blue, although the size of the deal may surprise some. Renault agreed to work together with Geely on hybrid vehicle production at its Busan factory in South Korea, which can assemble 300,000 vehicles per year.
Renault are in the process of restructuring as they aim to improve margins and gain a firmer foothold in the electric vehicle marketplace. Speculation has been rife in recent weeks that the company is seeking to sell its majority stake in Japanese automaker Nissan.
Reuters reports that for Geely the deal is about much more than than the Korean marketplace, quoting a source stating the company sees the move as an “open door into the US”.
According to the source, the firm may initially make use of the Busan plant to fulfil its existing supply agreement with Waymo, the Alphabet Inc subsidiary pioneering driverless taxis in the US. In December last year, Geely and Waymo announced a partnership to build self-driving electric vehicles.
“If Geely were to manufacture vehicles in South Korea, they would bypass the usual tax burdens due to the South Korea-US free trade agreement” said Andrew Winskill, head of institutional trading at Highview Management.
Renault has been buoyed in recent weeks by better-than-expected first quarter results, following a tough time through the Covid-19 pandemic. The carmaker announced a drop in revenue of 2.7% in the first three months of 2022, outperforming analyst projections of a 3% drop or worse.