Renault-Nissan to invest $160 mn in Korea unit

Renault-Nissan Alliance will invest $160 million to roll out Nissan models at its South Korean unit, the French automaking group said Friday

The Renault-Nissan Alliance said Friday it will invest $160 million to roll out Nissan models at its South Korean unit, with analysts saying it would gain from a weak won and recent free trade deals.

The unit, named Renault-Samsung Motors, in the southern port of Busan will produce an annual 80,000 units of Nissan's crossover Rogue, beginning in 2014, the French-Japanese firm said in a statement.

"Adding production in Korea shows a commitment across the alliance to helping Renault Samsung Motors achieve its targets for cost competitiveness and growth," said Renault-Nissan Alliance chairman and CEO Carlos Ghosn.

The move comes as Renault-Samsung suffers from plunging sales owing to a lack of new models and stiff competition from South Korea's dominant Hyundai-Kia group as well as imported brands.

In the six months to June it sold 83,062 units, down 33 percent from last year.

Renault-Samsung has been idling its sole plant in Busan for several days a month since December because of sluggish sales.

The plant has an annual production capacity of 300,000 vehicles but it produced just 73,810 units in the first six months of this year.

"The Rogue SUVs built in Busan will be exported to the United States beginning from 2014," the spokesman said.

"Increased productivity at the Busan plant will help the company turn around." Renault-Samsung posted a net loss of 292 billion won ($256 million) for 2011.

Jeff Lee, an analyst at NH Securities, said Renault-Nissan could benefit from South Korea's free trade agreement with the United States.

"It can produce cars in South Korea and export them to the United States, taking advantage of low tariffs," he told AFP.

He also said Japanese carmakers were also able to benefit from South Korea's relatively weak won as a strong yen continues to squeeze their margins.

A strong yen reduces the price competitiveness abroad of vehicles built in Japan and also deflates income from overseas markets when repatriated.

Renault Group is aiming to achieve a 10 percent market share in South Korea's passenger car market as early as next year, up from 8.4 percent last year.

Renault-Samsung was formed in 2000 when Renault bought a 70.1 percent stake in Samsung Group's car-making unit Samsung Motors.

Renault S.A. owns an 80.1 percent stake and the remainder is held by Samsung Cars.

-- Dow Jones Newswires contributed to this report --