Dongfeng Renault expects 1st China-made Renault SUV

Dongfeng Motor Corp President Xu Ping (Right) and Renault S.A. President and CEO Carlos Ghosn shakes hands after signing the joint venture contract on Dec 16, 3013 in Wuhan city, the capital of Hubei province. After eight years of talks, the two carmakers finally settled their Dongfeng Renault Automotive Co production base in Wuhan city. [Hao Yan/chinadaily.com.cn]

Chinese Dongfeng Motor Corp and French Renault S.A. officially signed their 50-50 Dongfeng Renault joint venture agreement on Monday in Hubei province, and will construct the new plant in Wuhan to produce the latest Renault SUV.

Renault S.A. President and CEO Carlos Ghosn said that "Dongfeng has been working with Nissan for years. With today's agreement, we are witnessing a unique alliance, an alliance with Chinese, French and Japanese companies that will work together."

Four billion yuan ($6.6 billion) in fresh capital has been injected into the new Dongfeng Renault Automotive Company, said Dongfeng Motor's vice-president Liu Weidong at the ceremony.

The total investment of the joint venture company will be 7.76 billion yuan ($1.27 billion). The new company was established with a registered capital of 4.71 billion yuan, according to announcements from Dongfeng Motor Group Co Ltd on Dec 5. Dongfeng Motor Group Co Ltd is Dongfeng Motor Corp's Hong Kong listed arm.

Renault sales channel

The new company will leverage the current Renault imported car sales channels to sell local manufactured vehicles and provide services.

Ghosn said the company will expand the distribution network from the current 92 dealers to 120 by the start of production, that is, the first half of 2016.

The China-made vehicles may also be exported, subject to Renault S.A.'s approval, says the listed company's announcement.

Company governance

Jacques Daniel from Renault was appointed the president of the new Dongfeng Renault Automotive Co. He was appointed Renault senior vice-president, China joint venture project leader, in February.

The executive vice-president will be Hu Xindong from Dongfeng Motor, and he is Dongfeng Motor's head of legal and securities affairs department, according to earlier reports.

The chairman of the board will also come from Dongfeng Motor, according to the news release.

The new company will have eight board members – four from Dongfeng Motor and four from Renault. Directors shall each be appointed for a term of two years, and may serve consecutive terms, according to the listed company's announcement.

The news release said the chairman of the board appointed by Dongfeng Motor and the general manager appointed by Renault will serve an initial four-year term.

"Governance will be shared equally between the partners. We will train each other, help each other and work with each other as equals," said Ghosn.

Joint venture plant

The new joint venture plant will start production in the first half of 2016 in its 95-sq- km manufacturing, research and development base in the Wuhan Economic Development Zone. The new company planned to reach a localization rate above 85 percent, according to Ghosn.

"We are going to be very busy in the next two years starting a new plant with a new product, investing together 170 million euro ($234 million)." said Renault Asia-Pacific Chairman Gilles Normand.

The new plant in the first phase will realize an annual productivity of 150,000 engines and 150,000 vehicles, half of its planned productivity of 300,000 vehicles. The plant is also set to produce the self-developed Dongfeng brand models, and work on the new energy vehicles.

Dongfeng Renault will recruit 2,000 people initially to work at the new, said Normand.

Before settling down the plant location, Renault considered Guangzhou as an alternative, home to the Dongfeng Nissan passenger car plant.

But Wuhan Economic Development Zone and Wuhan city erased the debt of Renault's failed former joint venture in Hubei province, and freed Renault from the Sanjiang Renault Automotive Co, which was halted in 2004.

Ghosn said in his speech that "I'd like to thank all the institutions at the local regional and state level, which have been instrumental to the approval process."

In 1993 Renault established a joint venture with Sanjiang Aerospace Group in Xiaogan, Hubei province. Renault had a 45 percent stake in the partnership, with Sanjiang holding 55 percent.

The State-owned Assets Supervision and Administration Commission on May 21 approved the equity transfer from Sanjiang to Donfeng Motor Group. Dongfeng Motor Group acquired 55 percent equity interest in Sanjiang Renault, the interest held by Sanjiang, for a consideration of one yuan.

Sanjiang Renault then was renamed as Dongfeng Renault Automotive Co Ltd with a registered capital of $111.2 million. The Dongfeng Motor Group holds 55 percent equity interests in Dongfeng Renault, and Renault S.A. holds 45 percent. Then the two companies injected capital and balanced the equity at the 50-50 ratio.

Dongfeng Motors' joint ventures

The Dongfeng Renault joint venture received approval on Dec 2 from the National Development and Reform Commission.

Renault forged an alliance with Nissan in 1999 and founded Renault-Nissan BV in 2002. The Japanese carmaker entered the joint venture with Dongfeng in 2003.

Dongfeng Motor now has six overseas partners, topping all Chinese carmakers in terms of the number of joint ventures. The company operates ventures with Nissan, Peugeot S.A., Volvo, Honda, Kia, and Yulon fromTaiwan.

Based in Wuhan, capital of Hubei province, Dongfeng Motor isChina's second-largest carmaker in sales volume.