Geely 'Global Purchase', to be continued
Text/Shanshan Xu
Geely, who loves "global shopping", has once again struck.
Geely officially announced on May 10 that its subsidiary Geely Automobile Holdings and Renault Korea Automobile, a South Korean subsidiary of France's Renault, officially signed a share subscription agreement. Under the agreement, Geely will acquire a 34.02 percent stake in Renault South Korea for 1.37 billion yuan ($210 million).
In Renault South Korea's current shareholding structure, Renault holds 80.1% of the shares and Samsung Card holds 19.9%. This means that after the transaction, Geely will become the second largest shareholder of Renault Korea.
Geely, which is constantly "buying, buying and buying", has slowly expanded its overseas expansion map. But this time, Geely may not be focusing on the Korean market dominated by Hyundai Kia, but may be the larger North American market.
Geely's real goal
As early as the end of 2021, news about this new collaboration has surfaced. This is also the result of the signing of a memorandum of understanding between the two companies in August.
Renault, which has lost money for three consecutive years, needs an investor who is not bad for money. This investor is preferably an insider and has some success in the field of electric vehicles; geely also needs a slightly influential brand to open up new overseas markets.
Whether Renault is short of money or not can probably be seen through recent news reports. Although Renault Korea's loss narrowed to 8.06 billion won (about 42 million yuan) last year from 79.6 billion won in the previous year, the parent group is busy spinning off the electric vehicle business and may not be able to provide more funds for its transformation.
Today's Renault has long ceased to be spirited, and the decline in competitiveness is an indisputable fact.
Therefore, in this cooperation, Geely has sided with the "technology export". According to the content of the cooperation, the two companies will produce traditional fuel vehicles and hybrid models in South Korea, and the new models will adopt Geely's CMA architecture and hybrid technology. In the future, the new car will rely on Renault's sales channels in Korea to face the Korean market, and will also be sold overseas.
"Supporting" Renault Korea is Geely's latest bet on overseas expansion. On the one hand, Geely will be able to knock on the door of the local auto market through this Korean joint venture; on the other hand, with Renault's foothold in the Korean market, Geely is expected to accelerate its expansion into other overseas markets.
After completing the acquisition of Volvo, Polestar, Lotus, Smart and other brands, Geely's overseas territory has become more and more complete. If renault Korea's localized production capacity is supported, Geely will also be able to establish closer cooperation with the three major Korean battery manufacturers LG Energy, SK On and Samsung SDI to further consolidate the supply chain.
The value of Renault Korea
However, can Renault Korea really open this door for Geely?
In the Korean automotive market, Hyundai and Kia firmly hold most of the market share. Entering the Korean market also means that it is necessary to compete head-on with the Korean brand.
In terms of 2021 car sales data, Hyundai Motor continues to win the Korean local championship with 3.89 million sales, followed by Kia with 2.77 million units. In contrast, joint venture brands such as GM Korea and Renault Korea sell far less than one-tenth of the sales of these two major Korean brands.
Compared with SsangYong, which operates far and wide, Renault South Korea sold less than 50,000 vehicles in South Korea last year. Although Renault South Korea increased by 2.5 times year-on-year in terms of export performance, the annual sales of 70,000 vehicles are not enough to explain the influence that the century-old brand "Renault" should have.
This is also an important reason why it was said earlier that Geely's target is probably not in South Korea, but in other markets.
Furthermore, Renault Korea's plant in Busan is the largest production base of its parent group in Asia, covering an area of 165 hectares, and perhaps with this joint venture, Geely can attack a larger market, perhaps Southeast Asia, perhaps North America. But if sales in the South Korean market continue to be depressed, Renault Korea does not seem to be able to meet Geely's ambitions.
Until then, the deal also needs to be approved by Chinese and South Korean regulators. Although South Korea has become more stringent in the approval of overseas acquisition projects in the past two years, considering that automobile manufacturing has not been included in South Korea's national strategic technology, and the small amount of this transaction, it is not expected that there will be much change.
And Geely's overseas chess game is still continuing.