Renault to Increase Dealer Rebates in China as Demand Slows

Renault SA’s venture in China will give its dealers more rebates as demand in the world’s biggest auto market slows and the French carmaker’s local business prepares for a new production plant due to open there next year.

Dongfeng Renault Automobile Co. will “improve dealers’ profitability through additional and faster rebate,” the venture said in an e-mailed statement through its public relations company. The carmaker, which met with its dealers yesterday, will also moderate sales targets for this year so “the majority of dealers could keep up,” it said, without providing details.

Renault’s help to its dealers follows agreements reached by Volkswagen AG and Bayerische Motoren Werke AG with their distributors in China. Dealerships in the country have asked for financial support and lower sales targets from carmakers after a combination of rapid expansion of sales networks and increased restrictions on ownership by cities hurt profit.

“Renault in China still needs to ramp up their dealership network,” said Rebecca Tang, a Hong Kong-based analyst at Haitong International Securities Group Ltd. “If they want to attract more dealers to sell their vehicles, they need to compensate them. It’s a good sign that they’re cooperating with their dealers.”

Shares of Sinomach Automobile Co., a Tianjin, China-based importer of Renault vehicles, climbed 2 percent to 22.25 yuan in Shanghai trading. The benchmark Shanghai Composite Index declined 1.6 percent.

Slowing Demand

Sales growth of passenger vehicles will probably slow to 8 percent this year from 9.9 percent pace in 2014, according to the China Association of Automobile Manufacturers.

Dongfeng Renault’s support to its dealers comes as it prepares to start sales of locally produced vehicles from 2016. Renault and Dongfeng Motor Group Co. are investing 7.7 billion yuan ($1.2 billion) to build a factory that will make 150,000 sport-utility vehicles.

The venture is looking to add 57 dealer outlets by the end of this year taking the total to 159, according to the company. More than 50 percent of the dealers made profits last year while two quit its network, the automaker said.

Dongfeng Renault, which currently only sells imported vehicles in China, reported sales rose 26 percent to 33,425 units last year.

— With assistance by Alexandra Ho

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