* Text/Spades with long sword
Geely's cooperation with French car company Renault seems to have reached a new stage.
On May 10, Geely Automobile Holdings formally signed a share subscription agreement with Renault Korea Motors, a South Korean subsidiary of Renault Group, which cost Geely 264 billion won (about $207 million). Upon completion of the transaction, Geely Automobile will hold a 34.02% stake in Renault's Korean subsidiary through Centurion Industries Limited. Of course, Renault Group still retains its majority shareholder status, and the financial data of its Korean subsidiary will continue to be consolidated with Renault Group.
Renault Korea Motors was incorporated in South Korea in 2000 and is principally engaged in automobile sales, production, design and research and development, and over the past 20 years, it has accumulated an extensive sales network, mainly through its own sales outlets and car dealers. As of May 9 this year (before Geely's stake), it was owned by parent companies Renault, Samsung Card and ESPOP Pool with 80.05%, 19.9% and 0.05% respectively.
In the eyes of most people in the industry, Geely's move aims to expand the Korean market and add a new tile to its own global territory. After all, Geely and Renault officially announced a cooperation in January this year, planning to launch an efficient and energy-efficient fuel-efficient, smart hybrid model in South Korea. It is reported that the model will use Geely's modular architecture and hybrid technology, and the production will be responsible for renault and Samsung's factories in Busan, South Korea, and the mass production time is expected to be in 2024.
But on the other hand, some industry insiders pointed out that Geely's stake in Renault's Korean subsidiary is actually "not intended to be in South Korea". An insider who claimed to be close to Geely said in an interview with Reuters that the deal was a way for Geely to sell South Korean-made cars to the U.S. market.
For now, the United States still imposes high tariffs on cars imported directly from China, and even if several of them expire this year, domestic industry representatives can still apply to maintain the tariffs. If this situation is maintained, it will undoubtedly greatly hinder the pace of Chinese car companies going to sea, and in recent years, most car companies will choose to choose europe or India for their first stop at sea.
Song Sung-jae, an analyst at Hana Financial Investment, said in an interview with the media that through the South Korea-U.S. free trade agreement, Geely can use Renault's South Korean factory to build cars and sell them to the United States, so that it does not have to face a high tariff burden.
Notably, the above-mentioned people familiar with the matter claim that Geely may initially use the production line in the Busan factory to build electric taxis for Google's driverless business Waymo.
However, analysts also pointed out that due to the strength of South Korean unions, Geely is bound to face higher labor costs in South Korea, and the consequent manufacturing costs will be higher; in addition, whether Geely and Renault can open up the situation in the Korean market and the US market that may enter the future is still unknown.
At present, the competition situation in the Korean market is relatively severe, according to statista data, the five best-selling electric vehicles in South Korea in the first half of 2021 are Hyundai Porter 2 EV, Tesla Model 3, Hyundai Lungiq 5, Tesla Model Y and Kia Bongo 3 EV, even if zoomed to the top ten, car companies other than Hyundai, Kia and Tesla are rarely on the list. If the statistical scope is expanded to the fuel vehicle market, almost all the local car companies that occupy the peak of sales are South Korea.
The US market is also not optimistic. In the traditional car market, BBA, Toyota and General Motors occupy the majority; if it is subdivided into the electric vehicle market, Tesla, which came out after 2015, has stolen the opportunity of other foreign car companies. If Geely wants to expand the US market, it will have to find another way to do it.
Based in South Korea, the curve into the United States, this is the intention of Geely. On Renault's side, the Intention of the French veteran car company is probably not just to expand in the South Korean market - the huge Chinese car market across the sea is the big cake that Renault really wants.
Previously, Renault had not thought about expanding the Chinese market, but its attempts had almost all failed for various reasons.
As early as the 1990s, Renault and Sanjiang Aerospace established Sanjiang Renault Automobile, but eventually because of cost problems, Brilliance Automobile then took over the mess of Sanjiang, but in the end it was also a no-brainer; in 2013, Renault turned to Dongfeng cooperation, this cooperation lasted longer, however, in the end, Renault still transferred 50% of dongfeng Renault shares held in April 2020. Prior to this, its sales in China had declined for two consecutive years, with sales of only 18,500 units in 2019.
Market entry point error? Or is the strategic direction going astray? Either way, Renault's two attempts in China did end in failure. But on the other hand, the Russian-Ukrainian conflict at the beginning of this year made it lose Russia, a large market, and the situation in other markets is not optimistic. In view of this, Renault is determined to challenge the Chinese market again – and for this reason, it has decided to bet on new energy.
Last month, Renault CEO Luca de Meo said that the company plans to set up a separate division for the electric vehicle business, which may be listed separately in the future; in addition, last month, there was also news that Renault planned to sell part of its stake in Nissan to raise more funds to support the development of its new energy vehicle business;
If the deal succeeds, not only can Renault get a sum of cash, Nissan's position in the Renault-Nissan alliance is bound to be improved, and such a gesture of goodwill may also allow Nissan to fully support Renault's new energy business development.
Cooperation with Geely is also part of Renault's return to China strategy, according to foreign media TheDetroitBureau, Renault is currently negotiating with Geely on the establishment of a Chinese joint venture, but the report does not mention the progress of negotiations between the two sides or the specific time to reach an agreement.
If Renault really borrows Geely to enter the Chinese market, considering the impact of localization on sales, it will probably take Geely's mature vehicle architecture system as one of the selling points, the latter's well-known vehicle architecture includes CMA, BMA, SEA and SPA, of which the CMA architecture and BMA architecture can have a good blessing for hybrid vehicles, if Renault wants to use pure electric vehicles as a wedge to break into China, Geely's latest SEA haohan architecture can also provide a strong boost.
Of course, even if Renault really gets this kind of blessing, it still has to face only a lot more enemies - there are new domestic car-making forces that have risen in recent years, there are "catfish" Tesla, and there are traditional car companies that are trying their best to make new energy. If Renault wants to play its own uniqueness, then finding the specific direction of force is the key, otherwise, no matter how big the investment is, it may only be a reproduction of the ending of "obscuring everyone".
*Image courtesy of Yandex