[KH Explains] Would Renault-Nissan alliance affect Renault Korea?

Last month, auto giants Renault and Nissan announced that they were reshaping their decades-old strategic alliance, calling Europe a top priority market in their renewed green push.

With an Asia strategy missing in the landmark deal, experts here warn that Renault Korea Motors could be downgraded as a production base for the French carmaker unless sizeable investments are made in developing its own new cars.

Decades-old alliance reshaped

On Feb. 6, Renault and its Japanese partner Nissan unveiled their plans to rebalance their partnership, pinning hopes to create a strong foothold in the burgeoning global electric vehicles market as a single, cohesive company.

Renault announced it would reduce its stake in Nissan from 43 percent to 15 percent, matching the 15 percent stake Nissan holds in its partner. As part of a quid pro quo, Nissan committed to buying a stake of up to 15 percent in Ampere, Renault’s EV spinoff unit. Mitsubishi Motors, who joined the alliance in 2016, also hinted it could take a stake in Ampere.

The new agreement would be carried out for an initial period of 15 years, extending the partnership that has been in place since 1999.

“We can now operate like a normal company, like any other company, that has a cross-shareholding participation,” said Renault Group CEO Luca de Meo during a press conference in London, joined together with CEOs of Nissan and Mitsubishi.

While the three carmakers agreed on multiple business items, including expansion in Latin America and India, they pinpointed Europe’s burgeoning EV market as the top priority of their rebooted alliance.

Nissan is considered to have pioneered battery-powered EVs, launching the Leaf compact in Europe in 2011. As the first Europe-based manufacturer to offer a fully electric car, Renault rolled out its iconic Zoe EV a year later.

But due to managerial stagnation mostly rooted in a lopsided partnership, both lost the first mover momentum after 2018, challenged by Tesla and other carmakers. During the January-October period in 2022, the Zoe ranked 12th, while Leaf failed to make the list of top 20 bestselling cars in Europe, according to data from the European Commission.

Renault said that the Ampere will be at the forefront in switching its China-dependent EV supply chain into a network based in Europe. Under the plan, it aims to increase Europe's share of its EV value chain from 30 percent to 80 percent by 2030.

Renault Korea's new role

The highly publicized announcement comes as Renault Korea has struggled to secure its footing in the Korean market, with no new car launches since 2020.

Last year, the carmaker sold a total of 169,641 vehicles, of which 117,020 were produced for export and almost 85 percent were headed to Europe.

“It is only logical the French carmaker will be focusing on its home turf -- mainland Europe. In the meantime, countries such as Korea might not be in Renault’s big picture to boost its EV business,” said Park Cheol-wan, an automotive engineering professor at Seojeong University.

Park added that not only does Renault Korea have no research and development capability, it has also frequently been exposed to labor-management conflicts, leaving its strategic importance on the wane.

Kim Pil-su, a car engineering professor at Daelim University, echoed the view and said, “Why would Renault let the Korean unit produce its upcoming EVs when other global carmakers even take the production volume of clean cars developed here back to their headquarters?”

Kim referred to GM’s Chevrolet Volt, a plug-in hybrid EV, that was originally developed by GM Korea. Although the car model uses batteries and other components mostly manufactured by Korean suppliers, it is produced in the US and exported back to Korea and other countries.

Facing a critical juncture for the decarbonization of transportation, Renault Korea is hoping to secure EV production volume.

Next year, it will launch a medium-sized hybrid SUV with China-based Geely Motors using Volvo’s EV platform. After the Chinese auto giant became the second-largest shareholder of the Korean unit, it vowed to set up a joint venture with Renault to develop “hybrid and highly efficient internal combustion engine powertrains” in 2022.

But Renault’s rejigged alliance with Nissan, which has not been keen on the French carmaker’s business tie-up with Geely due to concerns over technology transfers, might slow the Korean unit’s EV business drive, sources said.

“In the long term, hybrid EVs are likely to be phased out and battery-powered EVs will become the dominant form of green transportation,” said Park, the professor. “Renault is expected to go all out on the Ampere with Nissan. That might leave little room for Geely and Renault Korea to produce a separate EV lineup.”

A Renault Korea official declined to elaborate on possible changes in the Korean unit’s role under the reshaped Renault-Nissan alliance, citing the still-nascent stage of related discussions.

“Renault Group is seeking to build its key export hub for D/E segment (larger) cars in Korea, hinting at new investments worth billions of euros,” the official said on condition of anonymity. “Under the vision, Renault Korea is making efforts to further strengthen its competitiveness.”

The official added Renault Korea aims to launch new EVs after 2026 when the market is expected to sufficiently mature. Before that, more resources will be poured into eco-friendly hybrid vehicles, with plans to launch a new hybrid SUV next year, the official said.