Renault to supply Mitsubishi with two European car models

France's Renault will supply two car models for Japan's Mitsubishi Motors to sell on the European market, the carmakers said on Wednesday, even as the Japanese firm stops developing its own vehicles in the region.

The companies are part of an alliance that also includes Nissan, and which the carmakers have been trying to reboot as the industry faces growing costs and grapples with the Covid-19 crisis.

Producing cars for Mitsubishi, which would be derived from its own models, would help revive revenue from "sales to partners" at loss-making Renault.

The deal allows Mitsubishi to retain models in Europe without reneging on its plan to freeze development in the region as it cuts costs. The models would be sold from 2023, the companies said in a statement.

They did not say where the vehicles would be produced or what exact models would be given Mitsubishi branding.

Some of its best-selling city cars such as the Clio are manufactured outside France, in Slovenia and Turkey. A source familiar with the matter said before the announcement that discussions with Mitsubishi were not centred on French plants.

Renault's revenue from sales to partners, which include Nissan models, have been hit hard in recent months.

It will discontinue its manufacturing of some cars previously made for Stellantis, the company recently born out of the merger of Peugeot maker PSA and Fiat Chrysler, and it had long been a supplier of diesel engines which carmakers are now phasing out.

Renault has also been studying options to jointly develop at least one van model with Germany's Daimler, sources told Reuters last month.