'Adieu Samsung'... Renault Samsung Faces a Difficult Road

Samsung Card to Proceed with Full Sale of Renault Samsung Stake

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Renault Samsung Motors has reached a difficult crossroads. Amid the chaos caused by the global reshuffling of the automobile manufacturing industry, it is officially parting ways with Samsung Group, with which it has maintained a relationship for the past 20 years. Facing a chain of challenges including sluggish domestic sales, labor-management conflicts, and consequent market share decline, a 'challenging solo journey' has become inevitable.

According to the automobile and investment banking (IB) industries on the 19th, Samsung Card, the second-largest shareholder of Renault Samsung, has decided to sell all its shares and is currently proceeding with related procedures. This marks the end of the relationship between Renault Samsung and Samsung after 26 years since the launch of Samsung Motors and 21 years since the joint venture with Renault.

The split between Renault Samsung and Samsung was already anticipated. Renault Samsung did not renew the brand usage contract with Samsung, which expired in August last year. After an approximately two-year grace period, Renault Samsung would no longer be able to use the Samsung brand. Until now, Renault Samsung had continued the brand usage contract (on a 10-year basis) by paying Samsung 0.8% of its domestic sales revenue as a fee.

As a result, Renault Samsung is now faced with the necessity of a difficult solo journey. Since 2000, Samsung Group has not directly intervened in Renault Samsung's management, but the 'Samsung' brand has played a significant role in helping Renault Samsung establish itself in the domestic automobile market. An industry insider said, "Given the relatively low recognition of Renault compared to other imported brands in the domestic market, the influence of the Samsung name, which carries solid trust, was considerable," adding, "This will likely affect future domestic sales as well."

Industry experts believe that for Renault Samsung to overcome this difficult path, it must focus primarily on securing competitiveness. Renault Samsung has faced continuous sluggishness in the domestic market and production and sales difficulties due to the termination of consignment production (such as Nissan Rogue) in the export market. Consequently, it recorded a loss of 79.7 billion KRW last year alone, and this year's production target has been downgraded to about 100,000 units, roughly one-third of its production capacity.

However, recently, exports of the XM3 to Europe have shown strong performance, and there is hope as Renault Group and Geely Automobile have agreed to jointly develop the next-generation eco-friendly vehicles along with Geely's premium brand Lynk&Co, affiliated with Volvo. Professor Lee Ho-geun of Daeduk University's Department of Automotive Engineering stated, "If its status as a domestic car is shaken, Renault Samsung is likely to become a mere production base in the mid to short term, and if productivity does not improve further, withdrawal rumors may resurface," adding, "To avoid the worst-case scenario, both management and the labor union must focus on stabilizing production and improving productivity."

This content was produced with the assistance of AI translation services.