UPDATE 2-Renault bets on its 'second home' Spain with three new hybrid models

(Adds details on EU funds, context)

MADRID, March 23 (Reuters) - France’s Renault said on Tuesday it would start producing three new hybrid SUV models in its “second home” Spain in 2022-2024, strengthening its position in the country following an agreement with unions.

The carmaker will make Spain, Europe’s second-largest car manufacturer after Germany, a major hub for its E-TECH hybrids as it seeks to improve profit margins and cut costs after reporting an 8 billion euro ($9.5 billion) loss in 2020.

Renault currently manufactures three vehicles at its Palencia and Valladolid plants, in northwestern Spain.

“This plan reinforces Spain’s position as Renault’s second home,” Chief Executive Luca de Meo told an event at the Palencia plant, which will produce the new compact and larger-size models.

Spain’s King Felipe and Prime Minister Pedro Sanchez also attended the event.

De Meo did not give investment details, but said Renault’s plans would generate an estimated 12 billion euros for the Spanish economy in the next three or four years.

The plans also include developing new engines and other vehicle parts at Renault’s plants in Valladolid and Seville.

The announcement comes ten months after Renault’s alliance partner Nissan said it would shut its three Spanish plants by December as part of a wider overhaul.

Spain has lower production costs than France, giving it a potential edge.

Amid tougher EU emissions regulations, carmakers have been switching to battery-powered vehicles, a market dominated by U.S. group Tesla and Germany’s Volkswagen. The latter is considering whether to start producing electric vehicles in Spain in 2025 at its SEAT division.

Spain will use European Union funds to create a public-private consortium with SEAT and power firm Iberdrola to build its first factory for electric-car batteries.

De Meo said Renault would take part in government-promoted projects to seek EU funds for the automobile sector, but did not elaborate.

$1 = 0.8409 euros Reporting by Joan Faus. Additional reporting by Gilles Gillaume. Editing by Andrei Khalip and Mark Potter