Renault pulls out of Chinese joint venture

Posted by Sino SCS

Renault has sold its shares in a joint venture (JV) with a Chinese partner after its Wuhan assembly plant shut down for three months due to the coronavirus outbreak.

The carmaker had been involved in a 50-50 owned JV with Dongfeng Motor Corporation with which it hoped to establish a major presence in the world’s largest passenger car market in China.

Groupe Renault said in a statement it had entered into a preliminary agreement to sell its Dongfeng Renault Automotive Company Ltd (DRAC) shares to Dongfeng. As a result, DRAC will stop all Renault brand-related activities.

Analysts said the three-month shutdown of its Wuhan manufacturing plant had made it impossible for Renault to compete with rivals in China.

Francois Provost, chairman of China region of Groupe Renault said: “We are opening a new chapter in China. We will concentrate on electric vehicles (EV) and light commercial vehicles, the two main drivers for future clean mobility, and more efficiently leverage our relationship with Nissan.”

China is by far the largest market in the world for electric vehicles, with 860,000 sold in the country in 2019. EV sales are expected to make up 25% of the Chinese market by 2030.

Meanwhile, a Reuters poll has forecast China’s economic growth is set to fall to its slowest since the Cultural Revolution in the 1970s due to the effects of the coronavirus pandemic.

Analysts said 2020 growth for the world’s second-biggest economy to be around 2.5%, the weakest since 1976.

This is down from the 6.1% registered in 2019 and the 5.4% growth predicted for 2020 in March.

The survey also anticipated China’s economy will contract by 6.5% in the first quarter of 2020.

Separately, Singapore prime minister Lee Hsien Loong has called on ASEAN countries to adopt common criteria on travel and trade restrictions to build resilience for future economic shocks.

“It would be useful for ASEAN to have a set of common criteria or guidelines on when to impose travel or trade restrictions, and when and how we can relax them and with what appropriate safeguards,” Lee said at a virtual Special ASEAN Summit on Covid-19.

Lee predicted increased controls on movement of people across borders and a shift away from over-dependency on other countries for food, medical products and other essential goods.

In parallel to this, transportation companies in Indonesia have asked for government financial support to stay afloat after the country’s lockdown brought the industry to a virtual standstill, the Jakarta Post reported.

The Indonesian Chamber of Commerce and Industry (Kadin) said nearly all of the country’s transport companies had been hard hit by the outbreak.

Kadin deputy chair Carmelita Hartoto was quoted as saying the transportation industry, which had been affected since late February, had seen conditions worsen since social distancing measures were imposed in mid-March.

Author Sino SCS
中品供应链-Sino Supply Chain Service