Dongfeng-Renault deal dead in the water again

Dongfeng-Renault deal dead in the water againThe proposed joint venture deal between Dongfeng and Renault has reportedly stopped again. The two automotive companies have been in talks for years regarding the production of Renault vehicles in China, but have repeatedly had various setbacks. Currently Renault are importing vehicles into China, their most recent model launch is the competitively priced Renault Koleos SUV.

The reasoning for this setback is due to three barriers, the first of all being Dongfeng’s future. Dongfeng are pushing their future as a self developed brand rather than just being a car producer with foreign partners, Dongfeng currently has five foreign partners in China (Honda, Kia, Citroen, Peugeot, and Nissan) any further addition is likely to stretch them to the limits for the short term.

The second reason is the of location, if Dongfeng and Renault work together, would the factory be located in Xiangfan City (Hubei province) or in Huadu (Guangzhou Province). Renault’s partner, Nissan currently has two sites in China where vehicles are produced, the larger Teana sedan is built in Xiangfan city, but other models are produced in Huadu, Guangzhou. As many modern Renault and Nissan vehicles share similar parts, it would be likely that the majority of Renault vehicles could be produced at the Huadu factory alongside their Nissan counterparts, however the factory would likely need to be enlarged, then there is the issue of sourcing locally produced parts for the vehicles.

The third issue is down to market competition, are the Chinese ready for Renault? Renault are not a well known brand in China, and would require a lot of investment in terms of financials and time to build the brand in China. According to auto.qq.com, Renaults 2008 sales were less than a 1000 vehicles, which might have been due to a recall that might have been politically motivated. Renault currently has 33 dealers in China, and after the recall it has been reported that some dealers are no longer ordering spare parts for their cars, however to improve sales some dealers are offering free rescue service in the even of breakdown, discount parts, and offering free tanks of fuel with every car sold.