The French-Japanese auto alliance of Renault and Nissan is investing $US160 million ($A153.99 million) in its South Korean Renault Samsung Motors to produce Nissan-branded vehicles mostly destined for the United States, taking advantage of the South Korea-US free trade agreement and a more favourable exchange rate.
The investment, announced on Friday, will help utilise unused capacity at Renault Samsung's Busan plant, which has cut production to 180,000 vehicles a year, well below its full capacity of 300,000 vehicles, as sales slumped at home and abroad.
The plant will use the investment to annually produce 80,000 next-generation Nissan Rogue crossover four-wheel drives starting in 2014. They will be shipped to North America and a few Asian countries, said Nissan Motor Co chairman Carlos Ghosn.
With the production of Nissan-branded cars, South Korea and the struggling Renault Samsung Motors are moving closer to becoming an export base for the Renault-Nissan Alliance, which has been expanding outside Europe and especially in Asia.
"Korea is a very competitive base," Ghosn said at a news conference in Seoul.
"The Korean government has done a great job in supporting this industry with very competitive foreign exchange rates, which has allowed the industry ... to really weather the storm very well and continue to expand."
Japanese carmakers have been hammered by the strong yen which erodes profit from cars produced in Japan and then shipped overseas. To counter the unfavourable exchange rate, Japanese carmakers have increasingly moved production abroad, making countries such as Thailand important auto production bases.
But Ghosn said Renault has no plan to increase the capacity of the Busan plant.
"The 300,000 capacity that we have in Busan should be little by little filled."
The move to beef up production in South Korea is unique among major Japanese carmakers. Toyota Motor Corp and Honda Motor Co do not have plants in South Korea.
The move is also noteworthy for taking advantage of a trade deal that Japan lacks. South Korea is ahead of Japan in such deals, and already has a free trade agreement with the US, and is negotiating deals with Canada and Mexico, where the Rogue is also headed.
Renault was the first European carmaker to set up operations in South Korea. In 1994, Nissan formed Samsung Motors Inc with Samsung Group. In 2000, Renault of France purchased 70.1 per cent of Samsung Motors, which had entered bankruptcy in the wake of the Asian financial crisis, and renamed it Renault Samsung. Renault now owns 80.1 per cent of the manufacturer.
Analysts said the investment is Renault's quick fix for its ailing South Korean unit, which has been squeezed by nimble rivals Hyundai Motor and Kia Motors.