By Gilles Guillaume

PARIS, Feb 3 (Reuters) - Renault RENA.PA will build in France a new small electric vehicle engine using parts supplied by China's Shanghai e-drive, a spokesperson for the carmaker said on Tuesday, as it looks to reduce costs and protect margins in a sluggish European market.

Renault already imports from China small electric engines made by Shanghai e-drive for its new Twingo, a car it developed in less than two years thanks to input from the Chinese supplier and engineers.

Reuters reported in November that Renault had ended a project with France's Valeo to develop another more powerful EV motor without rare earths, and was considering a cheaper Chinese supplier instead.

Confirmation of plans for the new small engine was first reported by French automotive media L'Argus.

Renault will assemble the entry level engine at its factory in Cleon in Northern France, setting up a new production line from early 2027 to make up to 120,000 engines per year, the CGT union said in a statement published after a briefing by management of the Renault plant last week.

($1 = 0.8466 euros)

(Reporting by Gilles Guillaume; Editing by Dominique Patton and Emelia Sithole-Matarise)

((dominique.patton@thomsonreuters.com))