Renault and Dongfeng Plan a $1.8 Billion Joint Venture in China image

Renault will sign a deal by the end of this month with Dongfeng Motor to create a $1.8 billion joint venture in China and manufacture vehicles here, treatment according to China Business News.

The JV is to be restructured from an existing joint venture between Renault and China Sanjiang Space Group, which was approved by the Chinese government in May, according to an anonymous source. The Sanjiang operation was created in 1993 to manufacture the Traffic minibus, but in 2003 production was stopped and Renault and Dongfeng have been negotiating since then. Dongfeng is also said to be negotiating to purchase a stake in PSA Peugeot Citroen.

The JV with Dongfeng will offer Renault the possibility to have an alternative source of revenue coming from the Western Europe, which last year accounted for 60% of the French automaker’s sales. In May auto sales in Europe have dropped to a 20-year low, as increased unemployment caused by the financial crisis in the region has cut demand.

In May, wholesale deliveries of vehicles in China increased 9% to 1.4 million units, from a rise of 13% in April and 13.3% in March, according to the China Association of Automobile Manufacturers. Also in May, Renault and Dongfeng got approval from the Ministry of Environmental Protection to build a factory in Wuhan, which will have an annual production capacity of 150,000 units.

Source: Bloomberg