(Refiles to clarify source attribution in first paragraph)
By Laurence Frost and Hyunjoo Jin
PARIS/SEOUL, July 19 (Reuters) - Japanese automaker Nissan is preparing to assemble SUVs in South Korea, a source with knowledge of the proposal said on Thursday, under an export plan that masks a tactical withdrawal for alliance partner Renault's ailing local subsidiary.
Faced with collapsing domestic sales at Renault Samsung Motors (RSM), Renault-Nissan chief Carlos Ghosn plans to use its factory in the southern coastal city of Busan to build Nissan's Rogue model for U.S. consumers.
"From an alliance perspective it made a lot of sense," the source said. "RSM has an under-utilised plant and Nissan has blockbuster products in factories nearing saturation."
The export plan nonetheless suggests that France's Renault sees little hope of a short-term sales recovery for the 80 percent-owned RSM brand, which currently offers three sedans and an ageing 4x4.
Renault and Nissan declined to comment on the move, first reported in Japan's Nikkei business daily. Ghosn, who heads both companies, is scheduled to hold a press conference in the South Korean capital on Friday afternoon.
RSM has taken a drubbing from Hyundai-Kia , with its domestic market share falling by more than half in two years to less than 5 percent. The Hyundai and Kia brands' combined share rose 4 percentage points to 82 percent over the same period.
The Busan factory is running at 60 percent capacity, with 2012 production expected to total 180,000 vehicles out of a 300,000 maximum. Besides the four RSM models, it already builds Renault Koleos SUVs and a small number of Nissan sedans.
"Renault Samsung needs to become an exporter," said London-based UBS analyst Philippe Houchois. "It makes sense to use that capacity for Nissan."
Under Ghosn, Renault and its Japanese alliance partner increasingly pool vehicle designs and production to optimise resources and smoothe imbalances, including currency setbacks.
Nissan has shifted some production out of Japan in response to the yen's sustained rise against the dollar and other currencies. The won's lower valuation makes South Korea a more attractive export base.
Under the new plan, Nissan will build Rogues at Busan from 2014, with an annual production target of 60,000, the source said. Nissan's plant in Tennessee will continue making the model.
Korean-built Renault vehicles may follow later, including a variant of the Qashqai for Europe and other markets.
Exporting to Europe would allow Renault's South Korean operations to benefit from an EU free-trade agreement that has helped Hyundai-Kia increase its presence in the region.
The plan to build more Nissan and Renault models could also pave the way for an eventual RSM comeback at home, by building up the local supplier network and lowering costs. The brand will get its own new models if targets are met, the source said.
"It should be easy for them to regain a bit of Korean market share from Hyundai once there's a stronger product plan in place," UBS's Houchois said. (Editing by David Goodman)