The Renault Group announced today a major decision about withdrawing the Chinese passenger ICE car market. The company intends to focus on light commercial vehicles (LCV) and electric vehicles (EV).
It seems that the French company was significantly disappointed by its low car sales (in 2019 only 18,607 compared to production capacity of 110,000) and was not able to withstand high operating losses of more than 1.5 billion yuan ($212 million), according to Reuters.
The original plan under Carlos Ghosn was different - to expand and follow Nissan in China. Now, the plan is to focus on healthy, profitable or prospective segments and cash preservation.
Let's check the details of the decision.
Renault will transfer its shares in Dongfeng Renault Automotive Company Ltd (DRAC) - passenger car joint venture - to Dongfeng Motor Corporation, and DRAC will no longer use the Renault brand.
The light commercial vehicle business is operated through the Renault Brilliance Jinbei Automotive Co., Ltd. (RBJAC) joint venture and it will stay untouched. LCV sales in 2019 amounted to close to 162,000.
The EV business will continue through the two existing joint ventures:
- eGT New Energy Automotive Co., Ltd (eGT)
- Jiangxi Jiangling Group Electric Vehicle Co. Ltd (JMEV)
One of the most important parts of the press release is that the Renault City K-ZE, the first Renault BEV in China, will become a global car in partnership with Nissan and Dongfeng within eGT joint venture.
The K-ZE will be offered in Europe under Dacia from 2021. Who knows, maybe Nissan will try to sell it in the U.S.?
"Groupe Renault expect to reinforce its partnership with Nissan and Dongfeng within eGT to make K-ZE a worldwide car. A derivative for Europe based on “Dacia Spring” concept will be sold from 2021."
Groupe Renault sets its new Strategy for China
- Groupe Renault will focus in China on light commercial vehicles (LCV) and electric vehicles (EV).
- Groupe Renault will transfer its shares in Dongfeng Renault Automotive Company Ltd (DRAC) to Dongfeng Motor Corporation. DRAC will stop its Renault brand-related activities.
- LCV business is operated through Renault Brilliance Jinbei Automotive Co., Ltd. (RBJAC), leveraging Jinbei legacy with Renault know-how.
- EV business will be developed through the two existing joint ventures: eGT New Energy Automotive Co., Ltd (eGT) and Jiangxi Jiangling Group Electric Vehicle Co. Ltd (JMEV).
Boulogne-Billancourt, April 14th, 2020 - Groupe Renault unveiled today its new strategy for the Chinese Market, building on two of its key pillars: Electric Vehicles (EV) and Light Commercial Vehicles (LCV).
Within this new strategy, Groupe Renault activities in China will be driven as follow:
About Chinese ICE Passenger Car Market
Regarding ICE passenger car, Groupe Renault has entered into a preliminary agreement with Dongfeng Motor Corporation under which Renault transfers its shares to Dongfeng. DRAC will stop its Renault brand-related activities.
Renault will continue to provide high quality aftersales service for its 300,000 customers through Renault dealers but also through Alliance synergies.
Further development for Renault brand passenger cars will be detailed later within future new mid-term-plan Renault.
Furthermore, Renault and Dongfeng will continue to cooperate with Nissan on new generation engines like components supply to DRAC and diesel license to Dongfeng Automobile Co., Ltd. Renault and Dongfeng will also engage in innovative cooperation in the field of intelligent connected vehicles.
About Chinese LCV Market
Increasing urbanization rate, e-commerce extension, inner-city transportation schemes and versatile customers usages are the key characteristics of a rapidly changing LCV market in China. It reached 3.3 million in 2019 and is forecasted to maintain a steady upwards path.
Renault Brilliance Jinbei Automotive Co., Ltd. (RBJAC), launched in December 2017, is Groupe Renault’s sword arm for its LCV business in China.
Groupe Renault is leading the LCV market in Europe in terms of sales volumes for light commercial vehicles, as well as sales of electric light commercial vehicles.
Jinbei is a well-established Brand with 1.5 million customers in China and close to 162,000 sales in 2019.
With Renault expertise and technologies, RBJAC is modernizing Jinbei models and extending the line-up with a total of 5 core models by 2023. The joint venture will also export in the future.
About Chinese EV Market
With 860,000 electric vehicles sold in China in 2019, China is by far the largest EV market in the world. EV sales are expected to reach 25% of the Chinese market by 2030.
Groupe Renault was a pioneer on EV and has sold close to 270,000 electric vehicles in the world since 2011. It gives a strong competitive advantage in China as shown by the successful launching of Renault City K-ZE, the first joint venture EV car competing in A segment with the best local automakers.
Groupe Renault expect to reinforce its partnership with Nissan and Dongfeng within eGT to make K-ZE a worldwide car. A derivative for Europe based on “Dacia Spring” concept will be sold from 2021.
JMEV is known as an agile and efficient EV player since its creation in 2015. With Renault support in terms of quality and technologies, JMEV will cover 45% of Chinese EV market in 2022 with 4 core models.
This new China strategy will enhance Renault competitive advantages to sustain long-term presence in the Chinese market and maximize synergies with Nissan under the new Alliance concept of “leader-follower”.
We are opening a new chapter in China. We will concentrate on electric vehicles and light commercial vehicles, the two main drivers for future clean mobility and more efficiently leverage our relationship with Nissan said Francois Provost, Chairman of China region of Groupe Renault.