French car maker Renault has announced that it is pulling out of its lossmaking joint venture with Dongfeng Motor Corp due to lacklustre sales, reversing a much-heralded strategy put into place by former CEO Carlos Ghosn.
Renault China
The automotive firm said that it would stop selling petrol cars in China and would sell off its half of the 50-50 joint venture, Dongfeng Renault Automotive Company (Drac). The sale will also transfer full control of its plant in Wuhan to Dongfeng, meaning an end to the sale of Renault-branded cars.
“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 and more efficiently leverage our relationship with Nissan,” said François Provost, chairman of Renault's China business.
The French automotive company has struggled to make its mark in the Chinese market compared with rivals such as General Motors and Volkswagen with sluggish sales even before the outbreak of Covid-19 crashed demand in the country. The pandemic is expected to slow grown in China even further this year.
Renault is one of the hardest hit of the major car firms, closing plants across the world and considering taking out loans of up to €5-billion, which are guaranteed by the French state.
Renault's sales through the joint venture in China last year amounted to less than 20,000. Drac made only 14 cars in the first quarter of 2020 and sold just 633, down 89% from the same period the previous year.
The decision to quit comes on the heels of a disastrous year for Renault, seeing its profits wiped out and the implementation of €2-billion worth of cost-cutting plans.
This year, the company has seen 54% wiped off its share price. Last week, Standard & Poor's, the credit rating agency, degraded Renault's bonds to junk, while the company cancelled dividends and said that executives would take pay cuts during the crisis.
The company says that the decision to pull out of the Chinese joint venture was made before the coronavirus hit the markets.
This summer, Luca de Meo, a former Volkswagen and Fiat executive, will take over the reins at Renault - almost one year since the ousting of former CEO Carlos Ghosn, who is currently in his native Lebanon, a fugitive from the Japanese judicial system.
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