Renault may build over 70% of Clio subcompacts in Turkey

Article by Anita Panait, on October 6, 2012

French carmaker Renault is planning to produce over 70 percent of its Clio subcompacts in Turkey, union sources told Reuters. The move, however, will likely cause tensions with its workers and the French government, which is its largest shareholder. Two union officials told Reuters that during internal presentations, Renault revealed plans to source less than 30 percent of the new Clio model from France.

One of the sources remarked that the plan was presented as a decision. Around 41 percent of the last versions of Clio were produced in France, with about 46 percent sourced from Turkey and 13 percent from Spain. According to data from market researchers JATO Dynamics, the Clio is Renault's best-selling model in Europe, with 304,106 units delivered in 2011.

In February 2012, Renault's chief operating officer Carlos Tavares told the French Senate's economic commission in Paris that a Clio built at its plant in Flins, France, costs EUR1,300 more than the same car produced in Bursa, Turkey.

Tavares was looking to emphasize the difficulties that French carmakers Renault and PSA/Peugeot-Citroen face in competing against volume car manufacturers with lower labor costs like South Korean company Hyundai.

The cost disparity is much painful at a time when there is an intensifying price war on small cars in Europe as carmakers employ profit-consuming incentives to maintain sales volumes.

In 2011, Renault’s domestic plants accounted for around 42 percent of its overall deliveries in Europe. On the other hand, local rival PSA/Peugeot-Citroen has its domestic plants account for 64 percent of its overall sales in the continent.

Renault’s gradual shift of production to lower-wage economies has already become an issue with its largest shareholder, the French government, which holds a 15-percent stake in the carmaker.

In 2010, reports that Clio’s production could be moved abroad have prompted former French President Nicolas Sarkozy to summon Renault chief executive Carlos Ghosn for public scolding.

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