Contract Renewal for Next Year Not Guaranteed
The production volume of the Rogue, a Nissan SUV, produced at the Busan Plant of Renault Samsung Motors has topped 500,000 units. Still, the South Korean automaker cannot celebrate the achievement as contract renewal for next year is not guaranteed amid the ongoing conflict between Renault and Nissan.
Renault Samsung Motors had remained in the red before it started the consignment production of the SUV. However, the automaker’s business performance has turned around after its contract with Nissan. The annual production volume of the Busan Plant is approximately 250,000 vehicles, with the Rogue SUV accounting for 40%.
The contract for the SUV terminates in September next year. Although Renault Samsung Motors is hoping for contract renewal, things are serious between Nissan and Renault, the parent company of the South Korean carmaker. Their alliance is in danger now after Renault-Nissan Alliance CEO Carlos Ghosn was recently arrested in Japan. Renault, the CEO in particular, played an important role in the contract manufacturing of the SUV. The contract may be affected depending on how things go on between Renault and Nissan.
Previously, the Busan Plant competed for the contract manufacturing with Nissan’s plant in Kyushu, Japan. The competitiveness of Japanese carmakers has improved since then thanks to a weak yen, yet the South Korean automotive industry’s chronic problems such as militant labor unions and rigid labor regulations are still ongoing. If Renault Samsung Motors fails to extend the contract, the company and the regional economy it belongs to will take a direct hit. At present, more than 300 firms are working with Renault Samsung Motors and their combined sales are approximately one trillion won. 140 of them are located in Busan City and South Gyeongsang Province surrounding the city.
Renault Samsung Motors is working on other models in order to mitigate the potential impact. In addition, it is planning to produce the Renault Twizy on a CKD basis in Busan.