China approves $1.3 bn Renault-Dongfeng joint venture

China approves $1.3 bn Renault-Dongfeng joint venture
State-owned Dongfeng is China's second-largest vehicle manufacturer by volume.

Beijing has approved a long-awaited $1.3 billion joint venture between French carmaker Renault and Chinese giant Dongfeng, the Chinese firm said in a statement Thursday.

Each partner will have a 50 per cent share in the new company, it 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 ($1.3 billion) in the joint venture, which will be based in Wuhan in the central province of Hubei, said Dongfeng, China's second-biggest carmaker.

The project has been a decade in the making, after a previous unsuccessful joint venture by the French firm in China, which is the world's biggest car market.

Renault began operations with China Space Sanjiang Group in 1993 to produce the Traffic minibus, but production stopped in 2003. Dongfeng and Renault have been in talks since then.

Auto sales in China rose 4.3 per cent year-on-year in 2012 to 19.31 million units, hit by limits on numbers imposed by some cities to ease traffic congestion and tackle pollution.

But a report by the consultancy McKinsey predicted last year that the country's passenger car market would grow eight per cent annually to 22 million units by 2020.

Dongfeng has previously been reported to be negotiating to buy a stake in another French car firm, PSA Peugeot Citroen, with which it already has a joint venture.

"Through entering into the joint venture contract with Renault SA and the establishment of the joint venture, the overall competitiveness, brand value and technical strength and profitability of (Dongfeng) will be enhanced," the Chinese firm said.

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