Wed, Dec 18, 2013 - Page 15 News List

Renault signs deal with Dongfeng Motor Group

Bloomberg

Renault SA, France’s second-largest automaker, is to build sport utility vehicles at its joint venture factory with Dongfeng Motor Group Co as it targets to sell locally made vehicles in China by 2016.

The two companies are to work closely with Nissan Motor Co, which also produces cars with Dongfeng, as part of a “golden triangle” to gain synergies in costs and technology, said Carlos Ghosn, chief executive officer of both Renault and Nissan.

Renault and Dongfeng signed the 7.76 billion yuan (US$1.28 billion) partnership agreement yesterday in Wuhan, China.

By the time the first China-made Renault is available for sale in the first half of 2016, the French automaker would have lagged further behind Volkswagen AG, General Motors Co and Toyota Motor Corp. All of them have more than a decade’s head start over the French automaker in producing in the world’s largest auto market.

“If you look at the market, who needs Renault in China, to be blunt,” said Philippe Houchois, a London-based auto analyst with UBS AG, who recommends holding the stock.

French automakers have the weakest presence in China, accounting for 3.1 percent of the passenger-vehicle market share in the first eleven months of this year, trailing Chinese, German, Japanese, US and South Korean brands, according to the state-backed China Association of Automobiles Manufacturers.

“Arriving late or soon is not the issue,” Ghosn told reporters yesterday. “Are you ready? That’s the issue.”

For Renault, the decision to start manufacturing in China forms part of the automaker’s plans to cut reliance on Europe, which accounts for half its vehicle sales, and where car demand is at a two-decade low.

Producing cars in China will help Renault save on the 25 percent import duty, allowing the company to sell its vehicles at more competitive prices.

The Renault-Dongfeng partnership can gain a competitive edge despite being a latecomer by harnessing the experience of Nissan, from dealerships to marketing to technology, Dongfeng president Xu Ping said today at a briefing.

The venture currently only has a license to produce SUVs and the target is to be able to produce the full range of passenger vehicles in the future, he said.

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