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Jan 22, 2019,  by Allianz Partners Business Insights

Automobile: French manufacturer Renault focusing on electric cars for Chinese development

Renault is set to acquire a "significant" stake in JMEV, a subsidiary of Chinese company Jiangling Motors which specialises in 100% electric vehicles. This new strategic partnership is designed to help the French automotive manufacturer strengthen its position in what is a burgeoning sector in China.

 

The Renault group has just announced an agreement which is set to help it to develop in the Chinese electric vehicle market that is currently enjoying major growth. The French automobile manufacturer intends to acquire a "significant" stake in JMEV, a subsidiary of Jiangling Motors (JMCG) dedicated to electric vehicles, according to French economic daily Les Echos.

A Renault spokesperson stated that their "intention is to have a balanced stake in the future joint venture". The agreement still needs to be approved by the authorities in China over the course of the first half of 2019.

 

JMEV – a benchmark in the Chinese electric vehicle sector

 

While Jiangling Motors, based in Nanchang in the south-east of the country, carries out most of the production of its utility vehicles and vans within the scope of a partnership with Ford, subsidiary JMEV is not covered by this agreement and as head of consultancy company DCA China-Analyse Jean-François Dufour point outs, they obtained a licence to produce electric vehicles in 2015 with no connection to the US manufacturer.

JMEV has been a success to date with 38,000 cars sold in 2017 and a target of 50,000 for 2018, which would move Jiangling up to seventh place in the ranking of Chinese manufacturers of NEV (new energy vehicles). It represents 6% of a market which has just gone past the million vehicle mark.

 

Third partnership strategic after Dongfeng and Jinbei

 

This is not Renault’s first partnership in China. Back in 2013, the French manufacturer set up a first joint venture with Dongfeng, a dedicated internal combustion vehicle company, followed by a second one in 2017 with Jinbei, a subsidiary of Brilliance which specialises in utility vehicles.

This is a similar strategy to Volkswagen with JAC according to Dufour, who added: "The advantage for these European automobile manufacturers is that they can join forces with smaller entities than their traditional partners (SAIC and FAW for Volkswagen, Dongfeng for Renault), and companies that are more concerned with ensuring that the joint ventures will be their life blood, but that at the same time are not start-ups with uncertain levels of capacity."

 

Renault sales down in China in 2018

 

Renault’s presence in China is a recent phenomenon but the French brand is highly ambitious and hopes to achieve sales of 550,000 by 2022. In the first nine months of 2018, they sold 167,908 units, but that falls to 44,174 without the utility vehicles, representing a drop of 16% year-on-year. This is the first time that the Chinese market has fallen in almost 30 years, with sales down by around 3%, according to Les Echos.

 

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