Dongfeng, Renault to set up US$1.8b joint venture

Ambitious Chinese carmaker Dongfeng Motor and France’s Renault may sign a deal this month for an 11 billion yuan (HK$13.8 billion) joint venture after a decade of talks, a report said on Monday.

The project, to be restructured from an existing venture between Renault and China Sanjiang Space Group, was approved by state officials in May, a source told the China Business News paper.

Dongfeng, China’s second biggest automaker, has previously been reported to be negotiating to buy a stake in another French car firm, PSA Peugeot Citroen.

The Sanjiang operation was set up in 1993 to produce the Traffic minibus, but production stopped in 2003, and Dongfeng and Renault have been in talks since then.

Dongfeng acquired a 55 per cent stake in the Sanjiang-Renault project in June and the new joint venture will be based in the central city of Wuhan, said the source.

The Wuhan project is expected to start production of mainly sports utility vehicles and multi-purpose vehicles next year, and will have a first-phase capacity of 150,000 units a year, according to the paper.

A Dongfeng spokesman said it was “actively pushing forward the Dongfeng-Renault joint venture project”.

Renault in China declined to comment.

Earlier this month, the 21st Century Business Herald said that Thierry Peugeot, chairman of Peugeot’s supervisory board, had “pinned his hopes” on Dongfeng buying a stake in the troubled French automaker.

But company officials in China declined to comment on the reports.

Auto sales in China, the world’s largest car market, rose 4.3 per cent year-on-year last year to 19.31 million units, hit by limits on numbers imposed by some cities to ease traffic congestion and tackle pollution.

But a report by the consultancy McKinsey predicted last year that the Chinese passenger car market would grow eight per cent annually to reach 22 million units in 2020.