The deal between the two companies will also see the revival of the famous French sports car brand Alpine, which Renault killed off in 1994 due to dwindling sales.
The Caterham Group will take a 50 per cent stake in the Automobiles Alpine Renault Company that is currently 100 per cent owned by Renault SAS.
The emerging company will be known as The Socitété des Automobiles Alpine Caterham and will be formed in January 2013.
Renault chairman and CEO Carlos Ghosn was particularly upbeat about the project.
“This innovative partnership with Caterham embodies a longstanding ambition: the creation of a sports car with the Alpine DNA. It carries both opportunities for the Dieppe plant and the development of its historic know-how.”
Caterham Group chairman Tan Sri Tony Fernandes shared Ghosn's excitement and enthusiasm.
“I have not felt as excited about a new venture since I launched AirAsia in 2001 and I want to thank Carlos Ghosn and Carlos Tavares and everyone in our new Renault family for having belief in Caterham Group to create this partnership."
Essentially, Renault and Caterham will combine their skills and resources to build models in large and small series to establish a position in the sports car market. The plan is for each company (Renault and Caterham) to launch its own car within the next three to four years.
Both Alpine and Caterham share a history of producing lightweight, high-performance sports cars. It’s a formula that works well for both road cars and racing cars.
For Alpine, it stems from the fabulous A110 of nearly 50 years ago and a succession of wins that included the World Rally Championship in 1973, Monte Carlo Rally in 1973-74 and the Le Mans 24-hour race in 1978 with the RenaultSport A442B.
Caterham’s obsession with lightweight sports cars can be traced back to the 1950s, when it produced its first and most celebrated model, the Seven.
Each weekend there are over 1000 Caterhams racing on tracks all over the world, from Brands hatch to Abu Dhabi and throughout Asia.
Caterham Cars will utilise its 40 years of experience in road cars with the production experience of Renault to create a new-generation sports car that will embody the DNA of the Seven, which is still in production in Dartford, UK.
Under the partnership arrangement, Caterham will also get to retail future Alpine sports cars, providing Renault with greater production efficiencies.
At present, Caterham sells around 700 of its Seven sports car annually, while Renault sold more than 2.7 million cars in 2011.
Caterham will also be able to leverage its involvement in its team Lotus Formula 1 Team to promote its future sports cars.