Renault Plans $1.8 Billion JV With Dongfeng, Business News Says

Renault SA (RNO) will sign an agreement this month to form an 11 billion yuan ($1.8 billion) venture in China with Dongfeng Motor Group Co. (489) to produce vehicles in the world’s largest auto market, China Business News reported.

The venture with Europe’s third largest automaker may be injected into Dongfeng’s Hong Kong-listed unit, the Shanghai-based newspaper reported today, citing an unidentified executive at the Chinese company. Dongfeng spokesman Zhou Mi couldn’t immediately comment and Renault China referred questions to its headquarters in Boulogne-Billancourt, France, which wasn’t available for comment outside of office hours.

Forming the venture with Dongfeng would give Renault an alternative source of revenue from the Western Europe market, which contributed 60 percent of Renault’s sales last year. European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region cut demand. Renault Chief Executive Officer Carlos Ghosn said on July 6 the European car market will probably continue to contract in 2014 and 2015.

Wholesale deliveries in China of cars, multipurpose and sport utility vehicles increased 9 percent to 1.4 million units in May, according to the state-backed China Association of Automobile Manufacturers. That compared with growth of 13 percent in April and 13.3 percent in March.

Dongfeng and Renault received approval in May from the Ministry of Environmental Protection to build an assembly plant in Wuhan with an annual capacity of 150,000 units, according to a statement on the ministry’s website.

Renault, which had 95 dealerships in China at the end of 2012, sold 29,724 vehicles in the country last year, according to the company.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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