Dongfeng Motor Group to wholly control Dongfeng Renault after Renault’s transfer

Shanghai (Gasgoo)- Dongfeng Motor Group and Renault S.A. plan to restructure their joint venture Dongfeng Renault Automotive Company (DRAC) given the downturn in China's automobile market and the subsidiary's unsound operational performance, according to a lowdown released by Dongfeng Motor Group on April 14.

By signing a non-binding memorandum, the Wuhan-headquartered automaker said it has reached a preliminary agreement with Renault, which intends to transfer its 50% equity stake in DRAC to Dongfeng Motor Group. Besides, the joint venture will stop its activities related to Renault brand.

Founded on 2013, DRAC is a 50/50 joint venture between Dongfeng Motor Group and Renault S.A. In 2019, it only sold 18,607 vehicles, facing the second-year-in-a row decrease after the sales volume hitting the record high of roughly 72,000 units in 2017. Thus, its revenue and profit were hit by substantial losses accordingly.

(Photo source: Dongfeng Renault)

Based on the proportional consolidation method, DRAC, as a proportion of the group's total assets and incomes, reached 1.0% and 0.5% as of 2019, versus 1.3% and 1.4% as of 2018, Dongfeng Motor Group stated. Besides, the joint venture’s pretax profit for the year of 2019 was in negative status.

The sales performance has been worsened by the COVID-19 spread. During the first quarter of 2020, the joint venture only output and sold 14 and 663 vehicles, suffering 99.75% and 88.65% nosedive from a year ago. Although many automakers in China posted sales rebound in March as the virus has abated, DRAC’s volume even failed to surpass 100 units.

Dongfeng Motor Group claimed it will help DRAC carry out transformation and upgrade in accordance with the group’s holistic strategic deployment, aiming to realize a high-quality development and the innovation in technologies and business models.

Renault will continue to provide aftersales service for its 300,000 customers through Renault dealers but also through Alliance synergies.

Additionally, both parties will step up the cooperation with Nissan on new-generation engines, involving the components supply to DRAC and the diesel license furnishing to Dongfeng Motor Company Limited, a 50/50 joint venture between Dongfeng Motor Group and Nissan (China) Investment Co., Ltd.

The Chinese and French automakers will also conduct innovative collaboration in the field of intelligent connected vehicles.