April 25, 2024

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[THE INVESTOR] There have been serious talks within Renault Group about dropping the Samsung brand from Renault Samsung Motors, according to sources claiming to have inside information.

“It is my understanding that there has been some discussion on this matter, and the issue may be moving forward,” one of the sources told The Investor on the condition of anonymity.

He said that Renault is entertaining such thoughts as the firm is headed on its way for another stellar year. In 2016, the Renault-Nissan alliance sold almost 10 million cars worldwide, putting it at fourth place after Volkswagen, Toyota and General Motors.

Renault Group headquarters

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Renault-Nissan currently sells cars under nine brands -- Renault, Nissan, Mitsubishi, Renault Samsung Motors, Infiniti, Venucia, Datsun, Dacia and Lada.

So far, Renault has benefited from the Samsung brand name. The French-based company took over ailing Samsung Motor for 620 billion won (US$555.09 million) from Samsung Group in 2000, at a time when imported cars made up less than 1 percent of the market. Hyundai Motor and Kia Motors, on the other hand, accounted for 70 percent.

But in the future, Renault may be more than ready to stand on its own in Korea, earlier than 2020 when a related contract between the two groups expires.

“Renault has seen that its competitiveness is such that it feels comfortable in advertising the Renault brand more widely,” said another source close to the matter.

Renault Group, however, denied the reports. A spokesperson for Renault Samsung Motors also said he has not heard of such plans.

Putting Renault out there

In addition to what is reportedly happening at the headquarters, Renault has been taking steps to raise its brand awareness in Korea, especially as Renault’s original models are gaining popularity. For instance, the Twizy electric car -- which will go on sale in June -- will carry Renault’s diamond emblem, instead of the Renault Samsung badge in Korea. For other imported Renault cars -- including the upcoming Clio hatchback -- the automaker is still mulling whether to go with the diamond logo. 

Renault Samsung has been refurbishing its showrooms with Renault's signature yellow from Samsung's blue in recent years.

At the Seoul Motor Show this March, Renault Samsung showed off the Twizy and Clio hatchback -- both bearing the diamond logo.

“The diamond emblem fits better on some of the more compact Renault cars,” Lee Se-young, 32-year-old visitor at the exhibition said. “It makes them more exotic.”

Renault Samsung also changed the color theme of its showrooms from Samsung’s blue to Renault’s signature yellow in 2015. The move reflects the automaker’s desire to strengthen the Renault identity in the country, market watchers say.

“The firm seems to be internally highlighting the Renault identity to increase its brand awareness in Korea,” a Renault Samsung dealer told The Investor on condition of anonymity. “Many of our customers seem to identify Renault Samsung as a part of the Samsung brand, instead of the French Renault Group.”

Renault Samsung, meanwhile, said some of the cars were meant to have the diamond logo regardless of where they are sold.

The Samsung effect

Critics, meanwhile, are skeptical about the plans to abandon the joint brand before 2020.

“Renault still needs the Samsung brand,” said Shim Jung-taik, a former Samsung Motor employee and an author of several books on the Korean conglomerate, adding the automaker’s domestic sales could suffer if the Samsung logo is dropped.

“It’s not just about loyalties. From a whole marketing perspective, Samsung logo adds greater value to Renault in Korea.”

Since 2000, Renault has paid 0.8 percent of its domestic profits from cars produced at its Busan plant as royalty fees. In 2016 alone, Samsung raked in 18.7 billion won from Renault for using its name. In that year, the carmaker had posted record-breaking sales and operating profit of 6.24 trillion won and 417.5 billion won, respectively, on the back of the SM6 sedan and QM6 SUV. Further, Samsung’s credit card operating unit Samsung Card received 61.8 billion won in dividends for the 19.9 percent stake it owns in Renault Samsung Motors, according to the official audit report released in April.

Capitalizing on the Samsung brand for nearly two decades, Renault has gained a strong foothold in the domestic auto market. It even managed to carve out a niche segment of its own -- the compact sport utility vehicle. Such success is part of what sparked the speculation that the automaker will try to ditch the Korean brand soon.

“Samsung is cashing on billions of won in royalty fees every year, so it seems unlikely it will want to renegotiate before the contract expires,” Shim said.

Another source told The Investor that both sides are watching each other’s moves, and strategizing based on different possible scenarios.

By Ahn Sung-mi (sahn@heraldcorp.com)