Yahoo Finance Renault to Exit Dongfeng JV, Shift Focus to All-EV in China
Renault SA RNLSY recently announced that it will stop selling gas-powered passenger cars in China after exiting from a joint venture (JV) with Dongfeng Motor Group Co. owing to poor sales. Per Reuters, the venture sold only 18,607 cars in 2019, well below its annual capacity of 110,000, and posted an operating loss of around $212 million.
China automobile sales are likely to deteriorate further this year as a result of the coronavirus pandemic, which has escalated pressure on carmakers that were already struggling to establish a significant presence in China. Renault, which had entered the Dongfeng JV in 2013, is one of the few global carmakers to quit a big project in China in recent years.
Dongfeng — which will acquire Renault’s 50% stake in their venture — plans to revamp and expand their existing automotive plants in China, which will no longer manufacture Renault-branded vehicles.
Renault will exit from the Dongfeng JV, and will instead concentrate on light commercial and electric vehicles in China. Per Renault, light commercial and electric vehicles are the two main drivers for clean mobility, and would help it maximize synergies with Nissan.
Renault's light commercial vehicle business in China will be operated through Renault Brilliance Jinbei Automotive, which plans to roll out five new models before 2023. Conversely, the electric vehicle business will be developed through its existing joint ventures with eGT New Energy Automotive and Jiangxi Jiangling Group Electric Vehicle.
Nevertheless, Renault will continue to provide after-sales service through Renault dealers for 300,000 customers in China. Further, Renault and Dongfeng will continue to cooperate with Nissan on new-generation engines like components supply to DRAC and diesel license to Dongfeng Automobile Co., Ltd. The companies will also co-operate in the field of hi-tech intelligent connected vehicles.
Zacks Rank & Stocks to Consider
Renault currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are Weichai Power Co. WEICY, Veoneer, Inc. VNE and Denso Corp. DNZOY, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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RENAULT SA (RNLSY) : Free Stock Analysis Report
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