'Detroit of the East' gives green light to Renault SA venture
By Norihiko Shirouzu and Samuel Shen, Reuters
December 17, 2013, 12:08 am TWN
BEIJING/SHANGHAI--Renault SA clinched full access to China's auto market on Monday by sealing a joint venture agreement with state-owned Dongfeng Motor Group in Wuhan, a city fast shaping up as China's own Detroit.
Nine years after the two companies first announced plans for the joint venture, they finally inked a US$1.3 billion 50-50 partnership to introduce the French carmaker's own locally assembled models in the world's biggest auto market.
The deal allows Renault to fully tap demand in China, something it has been unable to do until now because of the lack of a strong local partner. China's central government requires all foreign automakers to have a local partner to be allowed to produce cars in the country.
To build a Chinese presence, Renault has been forced to rely on imports from South Korea. Now with Dongfeng, it will invest 7.76 billion yuan (US$1.28 billion) to build a factory in the central city of Wuhan, with the first car due to roll off the production line in 2016.
Renault, which has a long-standing alliance with Japan's Nissan Motor Co with whom it shares technology, plans to manufacture 150,000 cars a year in Wuhan and set up a jointly run network of retail stores.
The carmaker's investment is a boon to Wuhan, located about 700 km west of Shanghai and where the Yangtze and Han rivers intersect. The city, with a population of 17 million including its surrounding suburbs, is home to Dongfeng, China's second-biggest automaker.
The Wuhan government is aiming to transform itself into a major automotive manufacturing and a logistics hub in China by attracting global automakers and their Chinese partners to open shop, which some say has turned the city into a dust-ball due to the frenzied construction activity.