China's Envision Group To Construct $2.4B Renault Battery Plant In France: Bloomberg

China's Envision Group plans to spend up to €2 billion ($2.4 billion) on a northern France battery plant to power an affordable range of Renault SA RNLSY electric vehicles, Bloomberg reported.

What Happened: The deal is part of the European carmaker's EV strategy to acquire a slightly higher than 20% stake in a year-old French startup called Verkor for higher-performance power packs meant for more extensive and premium models.

Envision will build the battery plant at Renault's assembly plant in Douai.

EVs will make up 90% of Renault's brand sales by the end of the decade. Envision AESC battery unit plans to produce nine gigawatt-hours of batteries in 2024 and 24 gigawatt-hours by 2030 to outfit the future Renault 5 model. It pledged to create 2,500 jobs by the end of the decade.

Envision's plans for the Douai site could extend beyond Renault. Its building permit application is for a capacity of 43 gigawatt-hours by the end of the decade.

Envision is also in talks with other major automakers on supplying batteries from the Douai installation.

Japanese automaker Nissan Motor Co Ltd NSANY sold a controlling stake in its AESC battery operations to Envision in 2018 but retained a 20% holding. Envision CEO Lei Zhang talked about the possible expansion of operations in the U.K.

Renault's deal with Grenoble's Verkor could see the carmaker phasing out its current battery supply agreement with South Korea's LG Energy Solution around mid-decade.

Why It Matters: Verkor is planning to start work on a battery factory in France in 2023 for 16 gigawatt-hours, with ten gigawatt-hours going to Renault. Production could reach 50 gigawatt-hours in 2030, with 20 gigawatt-hours going to the automaker. The power packs cater to Renault's more extensive and pricier models in its range, including the Alpine brand.

Renault is also still talking to the ACC venture between Stellantis NV STLA and TotalEnergies SE TTE about a potential third battery tie-up for around 2027.

The French government can offer €200 million in aid to Envision and Renault for the EV projects.

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 400,000 cars annually. Renault has come under pressure to preserve jobs and keep EV technology in the country, with the French state as its most powerful shareholder.

Renault currently buys batteries for its Zoe model from an LG Energy Solution factory in Poland, continuing till the upcoming Megane EV lineup planned for 2022.

Price action: RNLSY shares traded lower by 1.67% at $8.25 on the last check Monday.