Renault, Chinese partner receive government OK for $1.3 billion auto joint venture

BEIJING, China – China has given Renault and a local partner approval to launch a $1.3 billion auto manufacturing joint venture, the French brand’s first in the world’s biggest vehicle market.

Renault SA, maker of the Clio and Megane hatchbacks, is one of the last major auto brands without its own manufacturing in China. Its arrival will add to already intense competition in a market crowded with global car makers and ambitious local brands.

The Cabinet’s planning agency approved the venture, which is intended to produce 150,000 multipurpose vehicles and engines per year, said Renault’s partner, Dongfeng Motor Group, in a statement Thursday. It said each partner will own 50 per cent of the venture.

Global manufacturers are looking to relatively robust China to drive sales at a time when Western markets are lagging. Total auto sales in China rose 7.1 per cent last year to 15.5 million vehicles.

Foreign automakers that want to manufacture in China are required to operate through local partners.

Dongfeng, one of China’s biggest auto manufacturers, already has joint ventures with Nissan Motor Co. and with Honda Motor Co.

Renault and Nissan own stakes in each other as part of a global business partnership.

Renault’s first-half profit fell to 39 million euros ($51 million) from 734 million euros a year earlier. It blamed slower sales, especially in Europe, and a charge to write off the value of operations in Iran that are threatened by international sanctions against the Tehran government.