The French-Japanese auto alliance of Renault and Nissan is investing US$160 million in its South Korean Renault Samsung Motors to boost annual production by 80,000 vehicles, taking advantage of South Korea’s free-trade agreement with the US.
The plant in the southern city of Busan is now making 180,000 vehicles a year, sold in South Korea and 60 other nations. Renault’s sole Korean plant has capacity of 300,000 vehicles a year, but Renault cut production as sales slumped at home and abroad.
The investment, announced yesterday, will be for the next-generation Nissan Rogue crossover sport utility vehicle, starting production in 2014, with annual capacity of 80,000 vehicles, mostly destined for North American markets.
The move to beef up production in South Korea is unique among major Japanese automakers. Toyota Motor Corp and Honda Motor Co do not have plants in South Korea.
The move is also noteworthy for taking advantage of a trade deal that Japan lacks. South Korea is ahead of Japan in such deals and already has a free-trade agreement with the US, and is negotiating deals with Canada and Mexico, where the Rogue is also headed.
Renault Samsung Motors was the first European carmaker to set up operations in South Korea. In 1994, Nissan formed Samsung Motors Inc with Samsung Group. In 2000, Renault SA of France purchased 70.1 percent of the bankrupt Samsung Motors, in the wake of the Asian financial crisis, and renamed it Renault Samsung. Renault now owns 80.1 percent of the manufacturer.
“The Busan announcement represents a unique win-win-win for Renault, Nissan and RSM, demonstrating the flexibility and power of the alliance for all partners,” said Carlos Ghosn, chief executive for both Nissan Motor Co and Renault SA.
Ghosn is scheduled to elaborate on the plan during a news conference in Seoul.
The investment comes at a difficult time for Renault Samsung. Last year, it lost 292 billion won (US$255.8 million) and a plunge in sales had even set off speculation that Renault might sell the South Korean unit. Ghosn said the announcement underlined its commitment to Renault Samsung.