Renault to build SUVs in China with Dongfeng Motor
Renault SA, France's second-largest automaker, will build SUVs at its joint-venture factory with Dongfeng Motor Group Co. as it plans to sell locally made vehicles in China by 2016.
The two companies will work closely with Renault partner Nissan Motor Corp. as part of a "golden triangle" to gain synergies in costs and technology, said Carlos Ghosn, CEO of Renault and Nissan.
Nissan also produces cars with Dongfeng in China.
Renault and Dongfeng signed the 7.8 billion yuan ($1.3 billion) partnership agreement Monday in Wuhan.
Renault is struggling to catch up with international rivals like Volkswagen AG, General Motors and Toyota Motor Corp, each of whom produce vehicles in China.
"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. "At the same time, I can understand, strategically it's very hard for anyone to ignore a third of the global market."
French automakers have a weak presence in China, accounting for 3.1 percent of passenger vehicle sales in the first eleven months of this year, according to the China Association of Automobile Manufacturers.
"Arriving late or soon is not the issue," Ghosn told reporters Monday. "Are you ready? That's the issue."
China sales
For Renault, the decision to manufacture vehicles in China forms part of the automaker's plan to cut reliance on Europe. Half of Renault's global sales are in Europe, where car demand is at a two-decade low.
Production in China will allow Renault to avoid a 25 percent import duty, so that the company can sell its vehicles at more competitive prices.
The Renault-Dongfeng partnership will harness the experience of Nissan, from dealerships to marketing to technology, Dongfeng President Xu Ping said Monday at a briefing.
The venture currently only has a license to produce SUVs; the goal is to produce the full range of passenger vehicles, he said.
However, Renault probably will find itself at a disadvantage in China, said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG.
"It will be tough to gain market share because you have now a market where almost every manufacturer is active," Gommel said. "You have growth rates that are much lower than in the past and consumers that don't know your brand. So there are a lot of obstacles."
Nissan also produces cars with Dongfeng in China.
Renault and Dongfeng signed the 7.8 billion yuan ($1.3 billion) partnership agreement Monday in Wuhan.
Renault is struggling to catch up with international rivals like Volkswagen AG, General Motors and Toyota Motor Corp, each of whom produce vehicles in China.
"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. "At the same time, I can understand, strategically it's very hard for anyone to ignore a third of the global market."
French automakers have a weak presence in China, accounting for 3.1 percent of passenger vehicle sales in the first eleven months of this year, according to the China Association of Automobile Manufacturers.
"Arriving late or soon is not the issue," Ghosn told reporters Monday. "Are you ready? That's the issue."
China sales
For Renault, the decision to manufacture vehicles in China forms part of the automaker's plan to cut reliance on Europe. Half of Renault's global sales are in Europe, where car demand is at a two-decade low.
Production in China will allow Renault to avoid a 25 percent import duty, so that the company can sell its vehicles at more competitive prices.
The Renault-Dongfeng partnership will harness the experience of Nissan, from dealerships to marketing to technology, Dongfeng President Xu Ping said Monday at a briefing.
The venture currently only has a license to produce SUVs; the goal is to produce the full range of passenger vehicles, he said.
However, Renault probably will find itself at a disadvantage in China, said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG.
"It will be tough to gain market share because you have now a market where almost every manufacturer is active," Gommel said. "You have growth rates that are much lower than in the past and consumers that don't know your brand. So there are a lot of obstacles."
