French car giant Renault opened its first car factory in China on Monday, the last major manufacturer to set up a plant in the country as it looks to tap into the world's biggest auto market. The $1.2-billion facility in Wuhan, a carmaking hub in the central province of Hubei, is a joint venture with Chinese manufacturer Dongfeng and will have an initial production capacity of 150,000 vehicles a year.
China's total auto sales grew at their weakest pace in three years in 2015, as a slowing economy and a stock market rout slammed into demand. But the country remains "a growth driver for the global auto industry", Renault CEO Carlos Ghosn said at the inauguration.
The factory was a "first big step" for the development of the Dongfeng-Renault joint venture and for the growth of Renault, he added. China is crucial to foreign auto makers, both as the world's largest market and a key source of revenue outside Europe and the United States, but until now, the French firm has largely allowed its Japanese alliance partner Nissan to take the lead.
Renault sold a mere 15,850 vehicles in China last year, down 50 percent on 2014, mostly SUVs built in South Korea. That gave it a market share of less than 0.1 percent. But Ghosn said the country was a "core part of Renault's strategic plan", and that its long-term goal was a market share of an ambitious 3.5 percent. Renault and Dongfeng have invested 7.6 billion yuan (now $1.2 billion) in the plant, which is spread over a 95-hectare (235-acre) site and currently employs 2,000 people. At first the Wuhan factory will build Kadjars, Renault's latest crossover model, a key sector for Chinese consumers.
"We see this niche exploding in China, and it's not going to stop," said Jacques Daniel, CEO of the joint venture. "We're arriving late, but with the right product."
But he acknowledged that the current situation in China was challenging. A total of 24.60 million cars were sold in 2015, according to the China Association of Automobile Manufacturers (CAAM) up 4.7 percent on the previous year, but only about a third of the near-14-percent growth seen in 2013. Also, the economy, the world's second largest, grew 6.9 percent in 2015, its slowest pace in 25 years. Car makers responded by slashing prices while some even cut production. The market for high-priced luxury cars has been hit by a government crackdown on corruption and an austerity campaign, launched after President Xi Jinping took office three years ago.
The Chinese industry group forecasts sales will still gain around six percent to top 26 million units this year. US auto giant General Motors was the top foreign brand in China last year, delivering a record 3.61 million vehicles, to beat German rival Volkswagen, which is struggling with a global scandal over emissions cheating. Renault's French rival PSA Peugeot Citroen, which is long established in China and also has a joint venture with Dongfeng, with three factories in Wuhan, sells 700,000 units a year in the country.
Renault will start producing electric vehicles in Wuhan next year, and Ghosn said the firm was considering developing an "affordable" electric car aimed at Chinese and developing world markets.
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