Renualt and Dongfeng venture finalized

The logo of French car manufacturer Renault is seen in Strasbourg eastern France, Oct 25, 2012. [Photo/Agencies]

The agreement of French automaker Renault and China's second-largest manufacturer Dongfeng Motor Corp., to launch a joint venture will be finalized this month after a decade of talks.

The investment of Dongfeng-Renault facility was expanded to 11 billion yuan from an earlier planned 7.21 billion yuan, and the new venture, settled in Wuhan, the home base of Dongfeng, will begin construction this month.

The project will develop in two stages. In first stage, comes with an investment of 7.2 billion yuan. Production will begin in 2014 with an annual output capacity of 150,000 cars, mainly SUVs and MPVs. With profits from first stage, the second stage will be launched to produce more types of automobiles.

In 1993 Renault established a joint venture with Sanjiang Aerospace Group with a 45 percent stake of Sangjiang-Renault held by Renault and a 55 percent held by Sanjiang.

With the State-owned Assets Supervision and Administration Commission of the State Council's approval this May, Sangjiang will transfer its 55 percent share of Sanjiang-Renault to Dongfeng Motor Corp's subsidiary Dongfeng Motor Group Co., LTD, a Hong Kong listed company.

Dongfeng-Renault's organizational structure will follow the example of Dongfeng Nissan Passenger Vehicle Company and Hu Xindong, head of Dongfeng's legal and securities affairs department, will be the Chinese side leader of Dongfeng-Renualt. The general manager of the joint venture will be Jacques Daniel, a member of the Renault Management Committee, as confirmed by Wang Zhengxiong, CMO of Renault China.

Car sales in China rose from 2.36 million in 2001 to 18.50 million in 2011. Beginning in 2011, the Chinese automobile market entered a phase of slow growth. Car sales in China rose 5.2 percent in 2011, the slowest pace since the nation's car culture took off at the beginning of the century.

The annual sales of Volkswagen and General Motors surpassed 2.8 million in China and that of Japanese and Korean Hyundai-Kia surpass 1 million, according to a report of China Business News.

It has been a long and hard process for Renault to tap the Chinese market and it missed the Golden Decade (2001- 2011) of the Chinese automobile market, observed some Chinese media.

Besides intense competition and an ongoing slow rise, Dongfeng-Renualt also faces the challenge of recruiting investors. According to data from Sinotrust, there were 26,779 automobile dealers in China up till the end of the first quarter this year. The sale sees a clear slowing down in development. One Renault dealer said that Dongfeng-Renualt has now started to recruit dealers.