TOKYO -- Renault has agreed to buy almost half of Brilliance China Automotive Holdings' unprofitable light commercial vehicle unit, giving the French automaker's another foothold in the world's largest auto market.
The companies agreed to invest a combined 1.5 billion yuan ($221 million) in Shenyang Brilliance Jinbei Automobile Co. in proportion to their stakes, Brilliance said on Wednesday. As part of the deal, Renault will pay 1 yuan to take a 49 percent stake in the subsidiary, the French automaker said in a statement.
Renault CEO Carlos Ghosn is using the company's strength in LCVs to expand in China and help rescue a struggling unit of Brilliance.
Shenyang Brilliance Jinbei reported losses of 1.1 billion yuan over the past two years and 3.6 billion yuan in liabilities as of the end of 2016.
"By joining hands with CBA, Groupe Renault aims at becoming a major LCV player in China," Ghosn said Wednesday. The CEO said China's LCV market has high potential and accounts for more than 3 million vehicles a year.
Renault is a leader in the European LCV market with about 16 percent market share in 2016, according to Brilliance. Renault is also capable of bringing new-energy vehicles to the company's lineup, the Chinese automaker said.
Brilliance said the cooperation with Renault will help "turn around its existing minibus operation as well as cultivate the full potential of the LCV market in China."
The LCV business has been an underperformer for parent Brilliance, which will probably report net income jumped 31 percent to 4.8 billion yuan this year, according to average of analyst estimates.
Sales of LCVs in China came to 106,900 units in the first five months of this year, according to a note to clients from Sanford C. Bernstein & Co. Passenger-vehicle sales totaled 9.4 million in the five months ended May, according to China Automotive Information Network figures.
"Whereas most investors now consider the minivan business a sizable and perpetual drag to Brilliance's value, we would expect today's announcement to offer hope of a turnaround," wrote analysts at Sanford C. Bernstein, including Robin Zhu. The parent company's shares should gain "given new hopes of a Renault-led turnaround," they wrote.
The carmakers gave no timeline for beginning production.
Brilliance also makes cars with BMW Group at two plants in Shenyang, including the 3- and 5-series sedans, while Renault makes vehicles with Dongfeng Motor Group in Wuhan.