Talks ongoing on Renault’s use of Dongfeng Motor’s assembly plant in China

Article by Christian A., on February 14, 2012

Renault is in talks with China's Dongfeng Motor to manufacture its automobiles in Dongfeng's assembly facility in the central China city of Wuhan, as reported by the country's official Xinhua news agency. The French vehicle manufacturer also intends to sell its cars through Dongfeng's Aeolus-brand dealerships, the wire service further revealed, citing sources from Dongfeng.

The plan will enable Renault to start local production without having to construct its own assembly plant. In addition, it would also let Dongfeng optimize its utilization of the facility, according to Xinhua. The plant owned by Dongfeng has a production capacity of 120,000 vehicles annually.

However, sales of Dongfeng's Aeolus brand dropped by 6 percent to 26,028 units in 2011, the LMC Automotive reported. Without an assembly facility in China, Renault imported 19,262 cards into the nation last year, an increase by 35 percent.

Dongfeng has a joint venture with Nissan, which is the corporate partner of Renault. Renault has made some first steps to expand in China. In 2011, it grew its network of dealerships in the nation to 80 from 50.

During a meeting of the French National Assembly's Economic Affairs Committee, Renault's chief operating officer Carlos Tavares said that the French carmaker is hoping to negotiate a final agreement with Dongfeng Motor Group Co. this year in order to build vehicles in China. Tavares added that the deal will enable Renault to establish itself "industrially" in China.

Just last month, Renault and Dongfeng signed a memorandum of understanding to build a joint venture in the central China city of Wuhan. Renault's corporate partner, Japanese auto maker Nissan, is the third best-selling brand in China, with sales of 835,217 units in 2011. Nissan is third behind Toyota and Volkswagen. On the other hand, Renault sold only 24,275 vehicles in China in 2011, all of which are imports.

However, to complete any agreement, Renault will have to go through the regulatory red tape. The central government of China recently set tougher limits on foreign automotive investment, as part of its efforts to remove excess production capacity. Despite Renault was able to expand in China. In fact, the French carmaker increased its dealership network in China from 50 to 80 in 2011.

Based in Boulogne-Billancourt, France, Renault is multinational auto company that produces of cars and vans. It is one of the two members of the Renault-Nissan alliance. Dongfeng Motor Corp., on the other hand, is traditionally one of the "Big Three" Chinese carmakers. Known as Second Automobile Works, until 1992, Dongfeng was formed in 1969.

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Topics: renault, china, factory

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