Photo: Renault
In January, Chinese group Geely and French automaker Renault signed an agreement to build vehicles in South Korea. The deal offered mutual benefits for both companies as Renault sought to break into the Asian market, and Geely wanted to expand its global web of partnerships. On Tuesday, Renault said it would sell a third of its Korea unit (34.02%) to Geely Automobile Holdings for $207 million, Reuters reported.
Chinese Geely Automobile Holdings will purchase about a third of Renault's Korean unit for $207 million, a strategic move to help it boost exports in the U.S. market. This also frees up funds for Renault, whose sales fell by a third for the third time in a row in 2021.
Geely, which also owns Swedish Volvo Cars and has a 9.7% stake in Daimler AG, is looking to expand its global reach by tapping into the South Korean market. The deal with Renault in South Korea also puts it closer to critical players in the EV market, including Samsung SDI, SK Innovation Unit, and LG Energy Solution.
Company insiders told Reuters the deal also goes beyond just selling vehicles in South Korea. It's a strategic move for the Chinese company to export cars made in South Korea to America.
The U.S. and South Korea have a free trade agreement. Therefore, Renault and Geely would be exempted from tax burdens exporting vehicles made in South Korea. The only downturn for the partnership is it would face high labor costs and tough competition from Hyundai and Kia, which currently dominate the market.
Renault isn't popular in China (the world's largest car market), an important market and profit pool for leading automakers including Volkswagen, Tesla, and General Motors. The automaker is planning a turnaround to help increase its margins and bolster its EV business to be on par with industry leaders.
The decision to sell the South Korean unit stake comes a couple of weeks after Bloomberg reported company would lower its stake in Nissan, where it is the leading shareholder.
Geely, which also owns Swedish Volvo Cars and has a 9.7% stake in Daimler AG, is looking to expand its global reach by tapping into the South Korean market. The deal with Renault in South Korea also puts it closer to critical players in the EV market, including Samsung SDI, SK Innovation Unit, and LG Energy Solution.
Company insiders told Reuters the deal also goes beyond just selling vehicles in South Korea. It's a strategic move for the Chinese company to export cars made in South Korea to America.
The U.S. and South Korea have a free trade agreement. Therefore, Renault and Geely would be exempted from tax burdens exporting vehicles made in South Korea. The only downturn for the partnership is it would face high labor costs and tough competition from Hyundai and Kia, which currently dominate the market.
Renault isn't popular in China (the world's largest car market), an important market and profit pool for leading automakers including Volkswagen, Tesla, and General Motors. The automaker is planning a turnaround to help increase its margins and bolster its EV business to be on par with industry leaders.
The decision to sell the South Korean unit stake comes a couple of weeks after Bloomberg reported company would lower its stake in Nissan, where it is the leading shareholder.
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