Geely buys stake in Renault Korea, eyeing U.S. exports

China's Geely Automobile will buy just over a third of Renault's Korea unit for $200 million, potentially helping it boost U.S. exports, and freeing up funds for the French automaker to invest in its electric business.

The sale will deepen cooperation between the two automakers on development of eco-friendly models in Korea, a market dominated by local brands Hyundai and Kia.

For Geely, the deal goes beyond selling cars in South Korea and is a way for the Chinese automaker to export cars built in South Korea to the U.S., a person close to the company said.

"It is an open door into the U.S.," said the person who declined to be named because the plans are confidential.

The person said that while the details of how the partnership would work had not yet been sorted completely, Geely might initially use Renault Korea's Busan plant to make electric robotaxis for Waymo, with which it has an existing supply agreement.

"With the South Korea-U.S. free trade agreement, Renault or Geely would not face tax burdens if they export vehicles manufactured in South Korea to the United States," said Song Sung-jae, an analyst at Hana Financial Investment.

Renault will sell a 34.02 percent stake in Renault Korea Motors to Geely, which owns Volvo Cars and a 9.7 percent stake in Daimler.

The move follows an announcement by the two companies in January to develop hybrid vehicles for South Korea and abroad, produced at Renault Korea's Busan plant.

Renault has been making and selling cars in South Korea, largely based on European models, for over two decades via Renault-Samsung Motors and can build 300,000 vehicles a year in its factory in Busan.

Renault-Samsung Motors’ sales have declined in recent years. Last year the brand sold 57,480 cars, a drop of 36 percent from 2020.

Renault is in the middle of a turnaround aimed at increasing margins and separating its electric vehicle business to catch up with rivals such as Tesla.

The acquisition will create synergies with Geely in South Korea, a market with potential for strong growth, Renault Korea said. 

Renault Korea will issue 45.4 million shares at 5,818 won per share to Geely's unit, Centurion Industries, the two companies said.

Renault will remain Renault Korea’s largest shareholder with a majority holding. Samsung Card, which held 20 percent of Renault Korea, said its stake has not changed.

Although Renault is in a long-running global carmaking alliance with Nissan and Mitsubishi Motors, the French company has been deepening ties with Geely. Renault is revamping its strategy in China to work more closely with Geely, despite initially working with Nissan in the world’s largest automobile market.

Bloomberg contributed to this report