French carmaker Renault (RENA.PA) said on Wednesday it will combine three of its plants in northern France to form an electric car hub with lower production costs, which aims to turn out 400,000 vehicles a year by 2025. Renault said creating the single plant, known as Renault ElectriCity, would lead to the creation of 700 jobs spread across the various sites, which currently employ nearly 5,000 people, by 2025. read more The company, which is looking to produce fewer and more profitable cars under boss Luca de Meo, faces strong competition in the electric car market, an area in which it had an early lead but where bigger rival Volkswagen is (VOWG_p.DE) is catching up. Its French plan to create a new legal entity and combine the workforce from the three sites has backing from all the company"s unions, Renault said, and will entail further labour negotiations as it overhauls previous work agreements. Talks will include reviewing gaps between some older contracts for 35-hour weeks that were paid at 39 hours and newer ones without that status, said Luciano Biondo, the head of the new industrial hub. Changes such as these "will contribute to reaching the necessary competitiveness to produce B segment cars in France", Biondo said, referring to smaller passenger vehicles. Of the three plants affected, Douai is a car assembly site, Maubeuge a commercial vehicles assembly plant and the Ruitz site, which manufactures gear boxes, will be assigned a new electrical components manufacturing role, Renault said. It will shrink the size of some of the factories and also aims to produce some its future electric models, like the Megane and next generation R5, on one assembly line. Loss-making Renault has been looking to slash costs, including through redundancies, as it tries to lift its profitability under De Meo. Electric cars are still more expensive to produce than traditional ones, adding to the cost equation. Renault wanted to nudge manufacturing costs to between 3% and 4% of the cars" selling price, but was still far from these levels, Biondo said.