Renault to Scale Down Chinese Operations to Concentrate on India

Renault is putting plans to expand its operations in China on the backburner in order to concentrate on its joint venture (JV) in India with Mahindra & Mahindra (M&M) to build the Logan passenger car. According to AFX International Focus, the comments were made at the Shanghai Motor Show by Renault's Asia-Pacific chief, Thierry Koskas. He was referring to the proposed partnership with Chinese carmaker Dongfeng, into which Renault had been planning to invest 300 million euro (US$407 million) for a JV plant in China with a built capacity of 150,000 units per annum (upa). However, these resources will now be allocated to Renault's Indian market entry.

Renault is expecting to secure a 4.6% share of the Indian passenger car market by 2011, with forecast Logan sales of 123,000 units, and it has decided to concentrate on this project. This is a logical approach as the Chinese passenger car market is becoming ever more competitive, with an increasing number of local manufacturers entering the market with self-developed passenger car designs. This is having a deflationary effect on vehicle pricing and is putting pressure on operating margins, despite the large sales volume growth that the industry is managing to maintain. The Logan would probably not be suited to the Chinese market, as consumers there have an appetite for larger, better-equipped cars, which means that Renault would have to enter with its C-segment Mégane and D-segment Laguna, which are currently due for replacement in Europe. In addition, Renault's affiliate company, Nissan, already has a significant foothold in the market through its JV with Chinese carmaker Dongfeng. Renault could also invest in its South Korean unit, Renault-Samsung, if it needs to further bolster its presence in the region at a later date.