On May 10, Geely Automobile announced that it has signed a share subscription agreement with Renault Korea Motor, a Korean subsidiary of Renault Group. Under the subscription agreement, Geely Automobile intends to subscribe for 34.02% of Renault Korea Motor's shares in the amount of 264 billion won (about 1.376 billion yuan).
After the completion of the transaction, Renault Korea Automobile's majority shareholder will remain Renault Group and will continue to be consolidated by Renault Group.
As early as August 9 last year, Geely Automobile and Renault Group announced the establishment of an innovative partnership, the two sides will focus on the hybrid market to share resources and technology, and focus on China and South Korea as the key market to cooperate. The cooperation between the two parties is aimed at the booming hybrid market in Asia, and the cooperation between the two parties is to leverage the advantages of Geely Automobile's vehicle platform on the one hand, and to leverage the advantages of Renault Group in terms of brand strategy, content and channels on the other hand.
In January this year, the two companies announced that they would launch high-efficiency, energy-efficient fuel and smart hybrid models in the Korean market. It is reported that the new car will use Geely Automobile's CMA modular architecture and hybrid technology, Renault Group's forward-looking technology, styling design, etc., produced by Renault Samsung's factory in Busan, South Korea, and is expected to be mass-produced in 2024, and the sales and after-sales network will use Renault Korea's existing ones. In addition, new vehicles will be launched in overseas markets.
In short, the cooperation model between the two parties is that Geely Automobile mainly contributes technology, and Renault Group is responsible for coordinating vehicle design, manufacturing, sales, after-sales and other aspects. As for the new car brand, Geely Automobile told the first financial reporter that it will be announced in due course.
According to the announcement issued by Geely Automobile, Renault Korea Automobile's previous operation was not good. In 2020, Renault Korea Automobile lost 380 million yuan after tax, and in 2021, the company turned a loss into a profit, with a profit after tax of 83 million yuan.
In fact, The Renault Group has been successful in the European market, but has repeatedly lost in the Asian market. In April 2020, Renault Group, which entered the Chinese market twice, failed again, transferring 50% of its shares to Dongfeng Motor Group, and Dongfeng Renault stopped business activities related to the Renault brand.
In the Korean market, Renault Group's business situation is not very optimistic. Renault's south Korean car sales in 2020 were 116,000 units, down about 50% from 2017, and although it has rebounded in 2021, it is still in a historical position. From the sales volume in April this year, Renault sold 2328 vehicles, ranking sixth after Kia, Hyundai, Genissy, Ssangyong Motors and Chevrolet, and the first Kia car sales were 50,995 units.
Renault brand in South Korea has declined, Jiangxi New Energy Technology Vocational College New Energy Technology Research Institute Dean Zhang Xiang pointed out to reporters that for the current Renault Korean automobile, the company needs to introduce new funds, technology and blood. Geely Automobile is a good partner, on the one hand, Geely Automobile has previously invested in Daimler and acquired Volvo, and has more experience in internationalization, on the other hand, Geely Automobile's new energy technology also has a certain competitiveness.
For Geely Automobile, the CMA modular architecture also needs to be installed on more models to share the R&D costs equally, Zhang Xiang added. Geely Automobile said that the investment in Renault Korea Automobile will help promote the internationalization of Geely Automobile products and consolidate its global market position, while creating synergies with existing businesses.
Of course, Geely Automobile's huge investment in the subscription of Renault Korea Automobile is not unconditional, and the two sides agreed that in the two financial years of 2022 and 2023, Renault Korea Automobile will pay a dividend of not less than 328 million yuan to Geely Automobile.
In addition, the revenue generated by the technology licensing is also expected to generate additional revenue for Geely Automobile. Geely Automobile has said that licensing revenue has become a new profit growth point for the company and an important direction for future profit sources. In 2021, Geely Automotive's other revenues, such as technical services and licensing profits, continued to grow, up 245.3% year-on-year.