Renault, Dongfeng sign outline China deal: sources

PARIS Fri Apr 13, 2012 10:13am EDT

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PARIS (Reuters) - Renault (RENA.PA) and China's Dongfeng Motor Group have signed a framework agreement on their planned joint venture, sources told Reuters, in an important step towards the French automaker's goal of assembling cars in the world's biggest market.

Renault and Dongfeng (0489.HK), China's no.2 automaker, signed the outline deal late last month setting out plans for joint production of vehicles including an electric car and an SUV, people with knowledge of the agreement said on Friday.

The sources did not elaborate. Renault had no comment.

Boulogne-Billancourt, France-based Renault is lagging its main rivals in China, where European market leader Volkswagen (VOWG_p.DE) is the dominant foreign car maker. Renault's 80 Chinese sales outlets sold just over 24,000 imported vehicles last year, the bulk of them Korean-made Koleos SUVs.

The French automaker has been in talks for months with Dongfeng, which already builds cars in a joint venture with Nissan Motor Co. (7201.T), Renault's 43 percent-owned Japanese affiliate.

Renault and Dongfeng had raced to reach an outline deal ahead of a change in Chinese rules that hampers new production investments by foreign automakers.

"We just made the window," one of the people said.

The framework plan clears the way for formal negotiations aimed at concluding a full joint-venture agreement by the end of the year, subject to Beijing's final approval, the sources said.

Renault is preparing a "major industrial investment" in China, Chief Executive Carlos Ghosn told reporters on April 5. Ghosn, who also heads Nissan, had said earlier in the year that the French automaker aimed to begin manufacturing vehicles with Dongfeng in 2014-16.

Renault and Dongfeng are also examining industrial cooperation opportunities with the Dongfeng-Nissan venture, a source said. The older partnership assembles SUVs on a similar underlying vehicle architecture to that of the Koleos.

Renault, which is expanding its Chinese sales network, also aims to win a share of the large sedan market there.

At the Beijing auto show on April 23, the company is set to unveil a new flagship car called Talisman, adapted for China from the SM7 model manufactured by its South Korean unit, Renault Samsung.

(Additional reporting by Gilles Guillaume; Editing by James Regan)

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