Renault Samsung Hopes SM5 LPG-Fueled Taxi Fares Well

The Renault-Nissan Alliance has been pulling many rabbits out of its global hats to try to shore up and turn around flagging sales at the Renault Samsung subsidiary of Renault in Korea.

The moves implemented last year have been effective and, on the face of it, make it appear RSM has achieved a robust turnaround and is on the rise.

RSM reports selling 169,854 vehicles in 2014, a 29.6% year-over-year surge. That includes 18,191 deliveries of the QM3 small CUV, which Renault produces in Spain and exports to RSM for local sale as an import car in Korea. The global total also includes 26,467 deliveries of the Nissan Rogue CUV, which RSM is producing on a contract basis for sale by Nissan in the U.S.

These inclusions represent combined sales of 44,658 vehicles. Without them RSM’s 2014 global volume, based on production of its own models developed in Korea, would have come to 125,196 units, a dip of a little more than 4% from the 131,010 sold in 2013.

Without the imported QM3 to bolster the domestic result, RSM’s sales in Korea would have come in at 61,812 units, not 80,003 as reported. That would have been an increase of just 1,785 units over the 60,037 sold domestically in 2013, a gain of a little less than 3%.

Overseas sales, without including the 26,467 copies of the contract-produced Rogue, would have been just 66,384 vehicles, not 92,851 units as reported, a decline of a little more than 2%.

So while valiantly holding its own, RSM is heavily dependent on the Renault and Renault-Nissan Alliance life-support measures quickly taken in Korea to save Renault’s continuing string of major investments.

Now RSM has announced a surprising innovation for markets such as Korea where vehicles fueled by liquid petroleum gas are big sellers.

When the automaker debuted its fourth-generation flagship SM5 midsize sedans, this year called the SM5 Nova family, it included four new 2.0L LPG-fueled versions designated the LPLi series.

RSM’s vice president-sales, Park Dong-hoon, says at this week’s debut of the new SM5 Nova lineup in Seoul that its sales target for 2015 is 30,000 vehicles. Of these, 60%, or 18,000 units, will be LPG models and 40% of total sales, or 12,000 units, will go to the LPG taxi market, he says.

It may be the first time an automaker has targeted its flagship vehicle toward the taxi market to achieve its overall sales goal.

The SM5 historically has been RSM’s most popular vehicle, having sold well over 900,000 units since its launch in 1998, and its 2015 first-year success heavily depends on its potential use as an urban taxi.

RSM has seen its once-thriving taxi-fleet sales decline considerably and, with the advent of the SM5 Nova LPLi series, hopes to jump back in.

To penetrate that lucrative and sorely needed market niche, RSM is not pulling a rabbit out of its technological hat but instead is putting a doughnut into the taxi version’s trunk.

RSM’s engineering and design teams have developed a doughnut-shaped LPG tank that is flexible and lightweight and fits snugly into the cavity usually designed into the trunk floor for spare tires. Competing LPG taxi sedans have a bulky tank – known in Korea as a bomb – installed in the trunk that eats up more than 50% of available space, leaving little room for cargo.

The SM5 Nova LPLi with the embedded doughnut-ring tank has a flat floor and enough cargo space to hold a folded wheelchair and a couple of suitcases. This should appeal to taxi-fleet buyers in a market where most cabs run on LPG and lack of trunk space is a pervasive customer complaint.

RSM invested 20 billion won ($18.2 million) over three years on the technology and development of the doughnut ring and is relying on it to play a key role in hitting the SM5 Nova’s 30,000-unit sales target announced by Park.

While the 30,000-unit target for the fourth-generation SM5 Nova is about 10% higher than the 27,248 units of the third-generation SM5 that were sold in 2014, domestic deliveries of the model were down more than 11% from the 30,725 sold in the prior year. So the new-generation flagship model’s 2015 sales target actually is slightly less than the previous model achieved two years ago.

The LPG model is not expected to have much impact on SM5 overseas sales, which in 2014 totaled just 4,215 units and were off 37.6% from 2013. Park doesn’t break out export sales from the 30,000-vehicle target.

He also tells reporters the SM5 Nova is the last of RSM’s new models for the near future. It competes in the Korean domestic market with Hyundai’s Sonata, Kia’s Optima and GM Korea’s Chevrolet Malibu, plus several imported midsize sedans.

The new vehicle is competitively priced in Korea in all classes with 10 versions available, depending on engine type and trim level.

The vital LPLi LPG-fueled taxi is priced in two trim levels at 18,140 won and 19,850 won ($16,500 and $18,000). Two consumer-sedan versions are priced at 23,150 won and 25,150 won ($20,980 and $22,790).

The G Series features a 2.0L CVTC engine with three trim levels ranging from 22,500-28,900 won ($20,450-$26,300).

A D-series diesel with a 1.5dCi mill comes in two price levels of 25,700 and 25,900 won ($23,400 and $23,600).

The SM5 TCE version features a 1.6L GDi Turbo and sells at 27,900 won ($25,400).

Park also says it’s unlikely the imported QM3 will be manufactured locally, but RSM would reconsider if the QM3 exceeded sales expectations. For now, he says, economies of scale and other factors make production in Spain less expensive than it would be in lower-volume Korea.