Renault reverses China plan, raising questions

A Geely tie-up would help Renault tackle several problems, including both its lack of access to the China market and unused capacity at its struggling South Korean operation. But to some, the move also raises questions about Renault’s intentions toward its 21-year alliance with Nissan, which has frayed since the 2018 arrest and ouster of former alliance Chairman Carlos Ghosn.

“This looks like the beginning of an exit strategy,” said one former high-level Renault executive, speculating about a rebalancing of the alliance.

In 2019, Renault stunned Nissan by attempting a merger with FCA without involving its Japanese partner. That gambit eventually failed, opening the door for PSA to combine with FCA instead. But that attempt spurred questions about Renault’s drive for new allies.

Geely, for its part, has been aggressive in snapping up foreign partners. Volvo and Lotus are among its constellation of holdings. In 2018, Geely took a surprise 9.7 percent stake in Daimler for $9 billion.

But to Renault Chairman Jean-Dominique Senard, teaming with Geely may be more about solving Renault’s South Korean conundrum than about reconfiguring its alliance with Nissan.

And Renault’s woes in South Korea were partly Nissan’s making.

Renault’s Korean subsidiary, Renault Samsung Motors, used the capacity of its Busan factory to make vehicles for Nissan, including the Rogue crossover for export to the U.S. But Nissan pulled that production in-house to deal with its own overcapacity issues.

In May 2020, Nissan said it would withdraw from selling cars altogether in South Korea, where local players Hyundai and Kia dominate the domestic market with a combined 70 percent share.

“The short-term intention is really to find a solution for the Korean plant,” said one person familiar with Senard’s thinking on the Geely deal. “It’s a solution to keep this factory alive.”