Renault abandons $5 billion invested Japanese battery and switch to Korean

[Korean]

Renault to Subcontract Electric-Battery Development - WSJ.com

Renault to Subcontract Electric-Battery Development

RENAULT—Renault SA RNO.FR +1.06% won't be using proprietary battery technology for its electric cars in the foreseeable future, and will instead rely more on a South Korean supplier, as the French auto maker seeks to save cash and reduce expenditure, people familiar with the matter said Wednesday.

Renault has signed a draft agreement with LG Chem Ltd. 051910.SE -1.45% —a unit of South Korea's LG Group 003550.SE -1.43% —to buy the company's battery packs, these people said.

A Renault spokeswoman confirmed the tentative deal with LG Chem.

LG Chem already supplies batteries to Renault for its Twizy, an urban, two-seater electric quadricycle, and the ZOE, a mass-market subcompact car that will go on sale later this year.

Renault originally envisioned the battery-supply deal with LG Chem to last only a few years—until it was ready to manufacture its own. But the French auto maker has now decided to leave the costly battery-technology side of its ambitious electric-vehicle strategy almost entirely up to the South Korean company, which has decades of experience in battery development and production and an army of engineers working on the technology, the people familiar with the matter said.

Renault and Nissan say they have invested some €4 billion, or roughly $5 billion, to get the first-mover advantage in what they expect will be a huge money spinner in the coming decades as emissions norms become increasingly more stringent for car makers and fuel prices tend to rise.

Renault decided it was less risky to subcontract battery development and production for a technology that's evolving so quickly that the power storage and efficiency of today's batteries will be outdated tomorrow, these people said.

This deal is particularly shocking because Renault owns Nissan and has invested billions in Nissan's EV battery JV with NEC, which produces battery for Nissan Leaf and a couple of Renault EVs.

Renault's decision to abandon a further investment in Nissan-NEC battery JV and simply outsource all battery engineering and production to LG is seen as the evidence that Japanese batteries are no longer competitive against Korean batteries, and Renault has seen the light after having worked with both NEC and LG.