Renault Exits Main China Venture Amid Weak Sales, Virus Woes

April 14, 2020 Updated: April 14, 2020

Carmaker Renault is quitting its main passenger car business in China following a long trend of weak sales exacerbated by the COVID-19 outbreak.

The company intends to relinquish its shares in a joint venture with Dongfeng Motor Group, with which it partnered in 2013 to build gas-powered passenger cars, Groupe Renault representatives stated in a release on April 14.

Renault’s Chinese partner Dongfeng was cited by The Wall Street Journal as saying the proposed transfer of shares hasn’t yet been formally approved.

Dongfeng had been anticipating Renault’s potential exit from the venture as long as a year ago, a banking source familiar with the matter told Reuters.

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A hostess poses next to a Dongfeng sedan at the Auto China 2016 auto show in Beijing on April 26, 2016. (Kim Kyung-Hoon/File Photo/Reuters)

The Renault–Dongfeng venture sold only 18,607 cars in 2019, far below its annual capacity of 110,000, and reported an operating loss of more than 1.5 billion yuan ($212 million).

“It’s increasingly difficult for some marginal brands to reach the minimum volume threshold in China,” said Paul Gong, an auto analyst at UBS, in comments to The Wall Street Journal. “Rather than further spending money to build the brand image and dealer network, exiting is probably the right strategy.”

New car sales in China suffered their biggest monthly plunge on record in February, according to China Passenger Car Association, dropping 80 percent year-over-year.

After growing steadily for decades, China’s auto market rolled over in 2018, with reports blaming things such as the economic downturn, tighter emission standards, and the rising popularity of ride-sharing platforms.

The historic drop in auto sales at the beginning of 2020 in China has been widely attributed to decreased showroom traffic and buyer demand amid the outbreak caused by the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus and which causes the disease COVID-19.

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Chinese workers at a production line of France’s Renault and China’s Dongfeng Group factory in Wuhan, China, on Feb. 1, 2016. (Johannes Eisele/AFP/Getty Images)

The China Association of Automobile Manufacturers predicted car sales would fall more than 10 percent in the first half and about 5 percent for the full year, Yahoo Finance reported.

Renault said it plans to retain some operations in China, the world’s biggest vehicle market.

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

Reuters contributed to this report.

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