Nissan has to cope with strong demand and offset the impact of a strengthening yen by outsourcing the production of several models to Renault's South Korean unit, according to a report by the Nikkei business daily. The unnamed sources said that Japan-based Nissan, which is currently an ally of France-based Renault, will transfer the production of tens of thousands of SUVs and other mid-sized and large cars annually to Renault-Samsung Motors.
The Nikkei said that Nissan, which has been faced with inadequate production capacity, hopes to benefit from South Korea's free-trade deals with the European Union and other regions. It could utilize the unit, which is 80% owned by Renault, as an export base.
A Renault spokesman said that Carlos Ghosn, the head of both Nissan and Renault, will be in South Korea on Friday for a news conference.
Renault's factory in South Korea produces several Nissan-badged cars like the Sunny midsize and Almera compact models that will be shipped to markets like Russia and the Middle East while Renault-branded vehicles will be sent to China, Europe and other markets. The plant, located in the southeastern city of Busan, has an annual capacity of 300,000 vehicles.
In the past few months, its production has been reduced due to slumping sales in South Korea and overseas, partly due to a shortage of new models. The total sales of Renault-Samsung, which exported 63% of its units in the first half of 2012, declined by 33% compared to the previous year.
This unit had been the No. 3 South Korean automaker (after Hyundai and Kia) but in the past years, it has lost some ground. In the first quarter of 2012, its domestic market share fell to 4.7%, from being at 10.1% in 2010. Nissan had submitted a bid for South Korean SUV maker Ssangyong Motor in 2010 to add to its capacity but it eventually dropped out of the bidding process.