Why Renault’s ‘Toenadering’ with China’s Geely beats marrying Nissan

Key topics:Renault deepens ties with Geely to achieve scale in EVs and hybrids.De Meo's exit raises questions on Renault's long-term independence.A Renault-Volvo merger is floated but faces political and strategic hurdles..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Chris Bryant.Luca de Meo’s imminent departure from Renault SA to fashion house Kering SA raises an important question: How should a profitable yet subscale French automaker ensure its long-term resilience in an era of cutthroat competition and rapid technological change?One plausible route open to Renault is to become more Chinese; it can do that by deepening an already flourishing partnership with billionaire Li Shufu’s Zhejiang Geely Holding Group Co., whose sprawling international stable of brands includes Lotus, Zeekr and Polestar. While there are risks in embracing a new Asian partner so soon after an alliance with Nissan Motor Co. imploded (that quarter-century union is now being partially unwound), Renault should consider an even more radical step: a merger with one of Geely’s core assets, Swedish automaker Volvo Car AB..When De Meo exits in mid-July (see here for a list of potential replacements) he’ll leave behind a more agile automaker in robust financial and operational health. When he took charge of Renault in 2020, it was spilling red ink and reeling from former Chief Executive Officer Carlos Ghosn’s arrest and subsequent flight from Tokyo; the French’s automaker’s finances are now heaps better compared with its struggling Japanese partner. That’s partly due to cost cuts, improved capacity utilization and Renault’s efforts to match China’s rapid innovations in electric vehicles, including establishing a Shanghai development center. Renault doesn’t sell cars in the US or China, so it isn’t as affected by the tariff and competitive issues affecting those huge markets. Furthermore, the French group now boasts a lineup of exciting new models including the electric Renault 5 E-Tech.But could this be as good as it gets for Renault? Its EV and software activities, which were carved out into a separate entity called Ampere in 2023, are only expected to break even this year and face mounting competition. Meanwhile, De Meo’s efforts to position Renault more upmarket remain a work in progress. It’s a pity, then, that he’s departing just as he was poised to unveil a plan – dubbed Futurama – to ensure Renault keeps its pedal to the metal. .Read more:.VW, Isuzu snub SA’s EV push, stick to fuel cars.While the details haven’t been disclosed, one important element is how Renault can find scale economies in a hugely capital-intensive industry despite selling just 2.3 million vehicles a year compared with Volkswagen AG’s 9 million.Ghosn’s 2018 detention destroyed any chance of a full-blown Renault-Nissan merger; the following year, Renault tried to wed Fiat Chrysler Automobiles NV but was beaten to the nuptials by Peugeot SA (leading to the creation of Stellantis NV).De Meo’s solution to the scale conundrum has been to nurture a collaboration with Geely. Three years ago, Hong Kong-listed Geely Automobile Holdings Ltd. acquired a minority stake in Renault’s South Korean subsidiary and in return Renault gained access to Geely’s so-called compact modular architecture platform. Renault’s Busan plant now produces the Grand Koleos hybrid SUV, which carries a Renault badge but whose technical underpinnings are Chinese. (Renault’s Korean factory is also set to produce the Polestar 4; Polestar is majority-owned by Li and Geely affiliates, while Volvo retains an 18% stake.)Ties between Renault and Geely deepened last year as they pooled their combustion engine and hybrid activities into a new company called Horse Powertrain Ltd. In February, they teamed up in Brazil, with Renault producing and distributing Geely vehicles there, while Geely Holding became a minority investor in its local subsidiary.Four months ago, De Meo described the Chinese partnership as “probably more natural” compared with the conflicting views Renault and Nissan often had, saying Renault and Geely would continue to look for ways “to find scale together,” while noting this doesn’t require “capitalistic ties.” Jefferies Financial Group analyst Philippe Houchois told clients last week that the CEO’s departure would “add to concerns about Renault’s ability to be independent” and “the growing influence of Geely as minority investor.” And former CEO Ghosn told Le Figaro from exile in Beirut last month that Renault lacked global reach and would have to consider “non-classical” moves and build solid alliances, particularly with Chinese groups. “The depth of the relationship with Geely will be at the heart of this debate,” he said.For now, a merger between Renault and Geely’s Volvo brand might be a step too far. The French government, which has a 15% stake in Renault and 22.5% of the voting rights, would need to be persuaded. Still, I wouldn’t dismiss the idea. Like Renault, Volvo is subscale; the Swedish group sold just 763,000 vehicles last year and is now having to cut thousands of jobs, with its share price close to a record low.Volvo’s market capitalization is around 48 billion Swedish kronor ($5 billion), less than half Renault’s €11.5 billion ($13.2 billion). Volvo’s more premium brand might appeal to Renault, whose Alpine sports unit is still relatively undeveloped, Bloomberg Intelligence’s head of automotive research Mike Dean told me, adding “I don’t think putting the two companies together is unthinkable.” Unlike in 1993, when the then state-controlled Renault and Volvo owned shares in each other and came close to merging, Swedish investors who blocked that union might be less of an obstacle this time: A Geely affiliate owns 79% of Volvo’s share capital.And Li Shufu has another reason to consider such a deal: Volvo could be banned from selling cars in the US from 2027 under new cybersecurity rules targeting companies controlled by Chinese entities; a merger with Renault would dilute his ownership. None of this is to say that a merger will happen anytime soon. Given what transpired with Nissan, I’d advise Renault to tread especially carefully. Nevertheless, the French group’s future looks distinctly Chinese — no bad thing..© 2025 Bloomberg L.P.

Why Renault’s ‘Toenadering’ with China’s Geely beats marrying Nissan

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