French automaker, Groupe Renault has decided to produce only electric vehicles for its Chinese consumers. This is due to the recent drop in sales of petrol cars in the country.
Renault Chairman for China Operations, Francois Provost said, “We are opening a new chapter in China. We will concentrate on electric vehicles and light commercial vehicles, the two main drivers for future clean mobility.”
The company also disclosed that it would be pulling out of its joint venture with a local manufacturer, Dongfeng.
Although no financial details were disclosed, Renault said that it would transfer its stake in the Dongfeng Renault Automotive Company (DRAC) venture to Dongfeng. This means Dongfeng will stop marketing the Renault brand.
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“Groupe Renault has entered into a preliminary agreement with Dongfeng Motor Corporation under which Renault transfers its shares to Dongfeng. DRAC will stop its Renault brand-related activities.
“Renault will continue to provide high-quality aftersales service for its 300,000 customers through Renault dealers but also through Alliance synergies,” Renault stated.
Why this matters: This new strategy announced by Renault comes years after the company has struggled with sluggish sales. The automaker had hoped its 50-50 joint venture with Dongfeng which was focused on a factory in Wuhan would help it bounce back in terms of sales.
However, with the global crisis of coronavirus affecting sales, the company has thought it wise to retake its steps and restrategize.
What you should know: While Renault has pulled out of producing and selling petrol cars in China, it is optimistic that electric vehicle production would boom in the country. According to the statement, China happens to be the largest electric vehicle market in the world as the country bought up 860,000 electric vehicles in 2019.
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However, Renault sold just 180,000 cars, both traditional and electric, in China in 2019, down from 217,000 the previous year, and representing less than 1% of the overall market.
Impact of coronavirus: Reports have it that Renault is one of the automakers that have been hit thoroughly by this pandemic as it had to shut down plants all around the world. The country is also said to be considering taking out bank loans guaranteed by the French state worth up to €5bn to see it through the crisis.