On Monday, Renault SA (XPAR:RNO, Financial) unveiled two new battery partnerships with Envision AESC, the battery segment of Shanghai-based Envision Group, and Verkor, a Grenoble-based industrial company. The partnerships followed closely behind announcements from Porsche AG and Volvo Car Group last week alongside Volkswagen AG (XTER:VOW, Financial)’s March announcement to build multiple European battery factories.
As emissions restrictions become increasingly restrictive across the U.S. and Europe, manufacturers have been doubling down on their clean initiatives. Renault’s announcement marks another global car manufacturer seeking to establish clear supply chains for the battery revolutions.
Renault's collaboration with Envision AESC has set in motion plans to develop a gigafactory in Douai that is expected to produce nine gigawatt hours of energy in 2024. By 2030, the gigafactory aims to produce 24 gigawatt hours of energy per year. The new gigafactory will be located in close proximity to Renault ElectriCity production sites in Douai, Maubeuge and Ruitz and should significantly increase Renault’s battery production and competitive edge in the region.
Under the terms of the deal, Envision Group plans to invest 2 billion euros ($2.38 billion) to help develop the gigafactory and new batteries which fall in line with the company’s overall mission.
“This first phase development will unlock future large-scale investment to grow the local supply chain and develop the whole life cycle opportunities of batteries, including energy storage, battery reuse, smart charging and closed loop recycling. It has the potential to create thousands of new high value green jobs as part of an end-to-end battery ecosystem in the region," Lei Zhang, founder and CEO of Envision Group, said.
According to Renault’s press release, the company also signed a Memorandum of Understanding to purchase a 20% stake in French startup Verkor. The agreement adds a major partner to Verkor’s consortium of companies aiming to develop green technologies within the French and European automobile sector.
The initial phase of the plan covers the financing of the Verkor Innovation Center, where the two companies will work hand in hand to develop a new high-performance battery for Renault’s range of vehicles. Prototyping is expected to begin as early as 2022 before the partnership moves to build a gigafactory for performance batteries in France. Initial output is expected to be around 16 gigawatt hours per year, with 10 of those gigawatt hours going directly to Renault and drastically strengthening the company’s battery supply chain.
As of June 28, Renault stock was trading at 35.26 euros per share, almost no change in light of their press release, with a market cap of 10.27 billion euros. According to the GF Value Line, the shares are trading at a modestly undervalued rating.
Renault’s positive news came hot on the heels of a massive recall of Tesla Inc. (TSLA, Financial) vehicles in China. According to China’s State Administration for Market Supervision and Administration (SAMSA), 285,520 Model 3 and Model Y vehicles that were manufactured by Tesla in Shanghai and also imported to China from the U.S. suffer from a flaw in certain driver assistance systems.
The release detailed problems where the active cruise control feature could mistake the speed at which the vehicle was traveling. This could then cause the system to speed the car up suddenly and cause collisions with other vehicles in extreme cases.
Despite the recall notice issued for the vehicles affected, Tesla owners in China will be able to avoid the need to bring their vehicles into a service center. Tesla is offering those affected a free software update that can be done remotely to fix the problem. The company issued the recall notice to “eliminate safety hazards” after the defect was initiated by SAMSA.
To date, no reports of crashes caused by the system defect have reached headlines. Tesla shares managed to trend up at $689.13 per share, giving the company a market cap of $663.93 billion on June 28 despite the negative headlines. The GF Value Line shows the shares trading at a significantly overvalued rating as per usual over the last year.
While Tesla has seemingly dodged a bullet with the recall, analysts have been quick to highlight the company’s need to maintain good press. Competitors in the U.S. and Europe have drastically scaled up their electric vehicle production and Tesla’s flash will lose its luster without any bad headlines tainting consumer opinions.
