(Bloomberg) — Envision Group plans to spend as much as 2 billion euros ($2.4 billion) on a battery plant in northern France to power an affordable range of Renault SA electric vehicles.
The deal is part of the European carmaker’s EV strategy that will also see it acquire a stake of slightly more than 20% in a year-old French startup called Verkor for higher-performance power packs destined for larger and premium models, according to a Renault statement.
French President Emmanuel Macron is scheduled to unveil the agreements on Monday at Renault’s assembly plant in Douai, where the Envision battery plant — the first in Europe for the company that also makes wind turbines — will be located. Ahead of a national election next year, Macron is seeking to reap political advantage from the prospect that some 4,500 jobs could be created by 2030 at the EV hub situated in a region that has long suffered from industrial decline.
Renault is the latest among European automakers to map out a battery plan in recent months, a sign that competition to ensure adequate supply for their electric cars is heating up. Porsche and Volvo Car Group last week announced plans to produce power packs, while Peugeot maker Stellantis NV will update investors on its EV strategy July 8. Volkswagen AG in March unveiled a multibillion-euro plan for six European battery factories.
Renault’s plans will “greatly bolster our position as we ensure the Europe-based production of 1 million electric vehicles by 2030,” Chief Executive Officer Luca de Meo said in the statement. EVs are a key part of his turnaround vision for the struggling carmaker that made a record loss last year. They will make up 90% of Renault brand sales by end of the decade, he said.
Envision AESC, the battery unit of the Shanghai-based parent, is planning for production of 9 gigawatt-hours of batteries in 2024 and 24 gigawatt-hours by 2030 to outfit the future Renault 5 model. The company pledged to create 2,500 jobs by the end of the decade.
Envision’s plans for the Douai site could also go beyond Renault. Its building permit application is for capacity of 43 gigawatt-hours by the end of the decade, a goal that Chief Executive Officer Lei Zhang said could be achieved if deals are reached with other carmakers.
Envision is coming to France for Renault but is in talks with other major automakers on supplying batteries from the Douai installation, he said in an interview.
“We have high expectations for growth in batteries,” Lei Zhang said, putting the group’s total annual sales at as much as $8 billion last year. “France is strategic for Envision.”
Renault’s decision to buy batteries from the Envision AESC division can be traced to its alliance with Japanese automaker Nissan Motor Co., which sold a controlling stake in its AESC battery operations to Envision in 2018 but retained a 20% holding. Lei Zhang said global output is currently a few gigawatt-hours and expansion of operations in the U.K. is possible.
Renault’s deal with Grenoble-based Verkor could see the carmaker phasing out its current battery supply agreement with South Korea’s LG Energy Solution around mid-decade. No financial terms were given for Renault’s stake in the startup.
Verkor is planning to start work on a battery factory in France in 2023 for 16 gigawatt-hours, with 10 gigawatt-hours going to Renault, it said in a separate statement. Production could reach 50 gigawatt-hours in 2030 with 20 gigawatt-hours going to the automaker. Renault said the power packs would be destined for larger and pricier models in its range, including the Alpine brand.
In taking a stake in Verkor, Renault will join shareholders EIT InnoEnergy, Groupe IDEC, Schneider Electric and Capgemini. Verkor and Renault declined to provide details on funding for the French battery plant.
Renault is also still talking to ACC — a venture between historic rival Stellantis NV and TotalEnergies SE — about a potential third battery tie-up for around 2027, according to the statement.
The Envision and Verkor projects would represent welcome foreign investment into France’s beleaguered industrial sector and come amid a European Union push to increase the region’s battery output, a business that has long been dominated by China’s Contemporary Amperex Technology Co. Ltd. and LG Energy Solution.
French government aid to Envision and Renault for the EV projects could amount to around 200 million euros, a French official said.
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The Douai vehicle assembly plant is one of three sites Renault plans to combine and turn into an EV hub called ElectriCity capable of churning out some 400,000 cars a year. With the French state as its most powerful shareholder, Renault has come under pressure to preserve jobs and keep EV technology in the country.
The carmaker currently buys batteries for its Zoe model from an LG Energy Solution factory in Poland, an arrangement that will carry over to the upcoming Megane EV lineup planned for next year, according to the statement.