Renault-Dongfeng JV deal seen to be inked this month

Article by Anita Panait, on July 12, 2013

Renault and Dongfeng Motor Group expect to ink an agreement later this month to create a Chinese joint venture, a source privy to the companies told Reuters. The source disclosed that the carmakers will invest nearly CHY10 billion ($1.6 billion) on the new joint venture, adding that they are "waiting for an official invitation" from the Chinese industry ministry.

A Renault spokeswoman reiterated that Renault is expecting for the Chinese government to issue final approval on the planned joint venture with Dongfeng this year.

Renault disclosed the partnership with Dongfeng in 2012 along with plans to build vehicles in China.

Renault's alliance partner, Nissan, already builds vehicles it own Chinese joint venture with Dongfeng. Renault shares surged up to 3.7 percent on Monday after China Business News reported that the carmakers hope to finalize their planned joint venture in July.

According to the daily, the Renault-Dongfeng joint venture would have a production capacity of 150,000 vehicles annually and will start building sport utility vehicles and minivans in 2014.

All foreign carmakers that want to build vehicles in China must operate through joint venture with a local company. Dongfeng, which is the second-largest carmaker in Chian, also operates joint ventures with Honda and PSA/Peugeot-Citroen.

A joint venture with Dongfeng in China would provide Renault with a new source of income aside from the western European market, which accounted for around 60 percent of its sales in 2012.

Renault and Nissan chief executive Carlos Ghosn remarked on July 6, 2013, that he expects the vehicle market in Europe to continue to shrink in 2014 and 2015. [source: Reuters]

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