Dongfeng, Renault agree on JV car project By Gong Zhengzheng (China Daily) Updated: 2004-05-11 08:49
Dongfeng Motor Corp, the State-run automaker preparing for an overseas
listing, will build a long-awaited passenger car joint venture (JV) with French
partner Renault in the nation's south, a source has revealed.
Dongfeng, based in the central Hubei Province, obtained the project with
Renault by beating De'long, an industrial and investment firm registered in
Shanghai, said the source, who refused to be named.
He said the JV will be located in Shenzhen, a pioneer of China's reform and
opening up campaign in Guangdong Province, with strong backing from the local
government.
"Both parties will have a 50 per cent stake in the joint venture with a
planned annual capacity of 300,000 Renault cars," the source told China Daily.
No official details have been revealed.
Last month, a Renault executive said that the company will announce an
overall China strategy during the summer.
The Dongfeng-Renault venture in passenger cars follows a rational line as the
pair have clinched a deal in trucks. The French automaker's Japanese ally -
Nissan Motor - has also teamed up with the Chinese firm.
The trio want to build a "triangle of synergy" in China, the world's
fastest-growing vehicle market.
In January, Dongfeng and Renault agreed to create a JV based on the former's
affiliate in southern China's Guangxi Zhuang Autonomous Region to make Renault
trucks.
Last July, Dongfeng and Nissan - 44 per cent owned by Renault - created a
US$2 billion venture in Wuhan, capital of Hubei.
The JV, the largest Sino-foreign automobile operation, produces Nissan cars
and Dongfeng trucks and buses.
Dongfeng also has diesel engine JVs with both Renault and Nissan in China.
Renault set up a JV in 1994 in Hubei with another Chinese partner to assemble
its Trafic wagon.
But the partnership has almost come to a standstill as a result of sluggish
sales over the past years.
Renault and De'long were in talks last year about attempting to revive the
venture by introducing Renault's Kangoo car.
When the project in Shenzhen with Renault is established, Dongfeng will have
five foreign car JV partners, the biggest number by a single Chinese automaker.
Dongfeng now also has car JVs with France's PSA Peugeot Citroen, Japan' Honda
and Kia from South Korea's Hyundai Motor.
Dongfeng Automobile Industry Investment Co Ltd, 57.14 per cent owned by
Dongfeng Motor Corp, is expected to launch an initial public offering in Hong
Kong during the fourth quarter of this year to raise some US$1 billion.
"It is understood that the company's listing will be held so money can be
pumped into the car joint venture with Renault in the short term," said Zhang
Xin, an auto analyst with Guotai & Jun'an Securities Co.
"In the long term, the expected overseas listing could help Dongfeng, as a
typical State-owned enterprise, speed up internal restructuring and improve
corporate governance."
The remaining stake in Dongfeng Automobile Industry Investment Co Ltd, which
was set up last year, is controlled by China's four State-owned assets
management companies - Huarong, Cinda, Orient and Great Wall - and the China
Development Bank.
Dongfeng Motor Corp has two home-listed arms - Dongfeng Automobile Co Ltd and
Dongfeng Electronic Technology Co Ltd, which have been enclosed in the Nissan
JV.
China's passenger car market is mainly controlled by the world's other auto
giants, such as Volkswagen, General Motors, Honda and PSA, which all have one or
more JVs with local partners.
Total sales of Chinese-made vehicles surged by 34 per cent to 4.39 million
units last year, including almost 2 million passenger cars.
