Renault Move into China – but at What Cost to Europe?

Could Renault’s new agreement with Dongfeng Motor Group Co. could spell trouble?

China is a market that every manufacturer would like to get into. To be specific, every manufacturer would like to get a big slice of the China sales pie.

But it is a market that not everyone has managed to crack. Take Fiat, for example. They haven’t managed to cut it over in China – their products aren’t right for the Chinese market, after all.

Chinese buyers want prestige; they want big showy cars – the wealthy often have drivers and they don’t really aspire to marques that aren’t seen as prestigious.

Fiat have tried to conquer this by looking to build the Jeep Compass over there; it’s a bit of a last ditch attempt (they left it far too late to give it a good shot, according to many analysts) but perhaps a more aspirational Sports Utility Vehicle will cut the mustard and gain them back some ground.

Getting back to Renault, they are pretty much finding themselves in the same position. With only 3% of car sales over in China being French, it’s not as if there is a lot of demand for Renault’s wares.

However, Renault have just signed an agreement with Dongfeng Motor Co. to build – yes, you’ve guessed it – Sports Utility Vehicles in China, too. Their plan is to sell their SUVs to the Chinese market by 2016.

Interestingly, both companies will work together with Nissan in an effort to pool resources and share costs. Sounds like a plan – until you delve deeper into it.

Once again, Renault have left it too late. By 2016, other manufacturers will have gained so much ground over in China that it will be nigh-on impossible (in my view) for them to catch up. Firms like Volkswagen AG have been going at it in China for a jolly long time.

Renault are actually at a point where they are trying to get into China to try cut reliance on Europe; if they can produce their models in China, they will save as much as 25% on import duty. It is in Europe where Renault actually sell around half of their cars.

So, in summary, could this spell trouble for Europe? In my mind, it cannot spell anything else.

We really shouldn’t be in a position where we are having to outsource manufacturing outside of the EU to bring vehicles back for sale. It is a situation that is really quite absurd and it is not one that – I feel – should be supported.

I know that by moving into China, Renault can tap into Nissan’s investment in technology and also experience in the Chinese marketplace in forging this new alliance. For now it is only SUVs, but if it all goes to plan, the models that are produced over there are set to grow.

Whilst I understand that Renault want to keep ahead of their game and grow vehicle sales at this critical time, I really have only one thing to say.

They should have thought about that sooner.

Written by @MotorMistress
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