Joint venture with Dongfeng puts Renault in China at last

China has approved a long-awaited joint venture between its carmaker Dongfeng and France's Renault, worth nearly a billion dollars.

Dongfeng and Renault had been in talks for ten years REUTERS/Jean-Paul

Renault is currently the only one of the world’s top ten car makers not producing in China.

The deal was announced as French Prime Minister Jean-Marc Ayrault arrived in China for a five-day visit, dominated by trade issues.

Analysts said the merger appeared to be a move by the Renault-Nissan alliance to secure its position in China, where Japanese brands sometimes suffer when relations between Beijing and Tokyo turn sour.

Renault and Dongfeng will each have a 50 percent share in the new company, the Chinese firm said, adding the government had approved the deal and "the production of 150,000 multiple-purpose vehicles and engines per year".

The two will invest a total of 7.8 billion yuan (.95 billion euro) in the joint venture, which will be based in the central city of Wuhan, said Dongfeng, China's second-biggest carmaker.

Renault is Nissan's largest shareholder, with a 43.4 percent stake, while Japan's number two automaker has around 15 percent of the French company.

Nissan, which operates in China in a partnership with Dongfeng, depends on the country for about one-quarter of its global sales.

It had a major sales drop last year when a Tokyo-Beijing territorial dispute set off sometimes violent demonstrations in China and a consumer boycott of Japanese brands. It has since been trying to claw its way back to a previous 7.7 per cent market share.

The project with Renault has been a decade in the making, after a previous unsuccessful joint venture by the French firm in China.

"Renault will use this opportunity to strengthen its scale and depth in the Chinese market and extend its industrial footprint," the firm said.

Ayrault, speaking in Beijing, welcomed the announcement. "This is good news," he said. "It means that this immense market will open up to a French automobile group that until now has been practically absent from it."

The company has so far trailed rivals such as US auto giant General Motors and Volkswagen of Germany, which have both been running multiple joint ventures in China for decades.

Total auto sales in China rose 4.3 percent year-on-year in 2012 to 19.31 million, hit by limits on numbers imposed by some cities to ease traffic congestion and tackle pollution.

Each company will appoint four of the joint venture's eight directors, Dongfeng said, with production to be increased "according to market needs", including vehicles using alternative energy.