Renault announced the sale of slightly over a third of its Korean subsidiary to China's Geely Automobile Holdings for around $200 million, allowing the French automaker to focus on its underperforming core markets and electric vehicle sector.
Renault is in the midst of a restructuring plan intended to increase profit margins and separate its electric vehicle (EV) and combustion engine operations as it tries to catch up with rivals like Tesla and Volkswagen in the race to greener driving.
The decision to sell a 34.02% stake in Renault Korea Motors for 264 billion won ($207 million) follows media allegations that Renault, the largest stakeholder in Nissan Motor, may reduce its holdings in the Japanese business.
Geely gains a footing in South Korea's automobile sector, which is controlled by local giants Hyundai Motor and Kia Corp.
Other manufacturers have found it tough to break into Korea, notably General Motors and SsangYong Motor, which is now controlled by India's Mahindra and Mahindra.
It also brings Geely closer to three of South Korea's most prominent EV battery manufacturers: LG Energy Solution, SK Innovation, and Samsung SDI.
"It's a cooperation, and Geely could be banging on the door of the South Korean EV industry," said Kim Jin-woo, a Korea Investment & Securities analyst.
"Building a strong track record in South Korea can assist Chinese manufacturers to sell EVs in other growing economies, as well as Europe and the United States, where they persist to knock on the door, but they are tough markets," Kim noted.
In January, Geely, which holds Volvo Cars and a 9.7% interest in Daimler AG, and Renault announced a deal to make hybrid cars for the South Korean market and beyond, which will be manufactured at Renault's Busan factory.
The two firms said on Tuesday that Renault Korea Motors will sell 45.4 million shares to Geely's business, Centurion Industries Ltd, at a price of 5,818 won per share.
At the end of last year, Renault held 80% of the company. The rest was controlled by Samsung Card, a credit card business that announced in December that it planned to sell its stake in the subsidiary but that no terms had been worked out.
In 2021, Geely Holding sold more than 2.2 million vehicles worldwide, with Volvo Cars selling 698,693 units and Geely Auto distributing 1,328,029 units. In 2021, the Renault Group sold 2.7 million automobiles.
The French automobile manufacturer will remain the majority stockholder in the Korean subsidiary after Geely's stake investment, Renault Korea disclosed.