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* Dongfeng-Renault to have 150,000 vehicle capacity
* Deal builds on China presence through partner Nissan
* Signing ceremony announced for Dec 16
By Laurence Frost and Donny Kwok
PARIS/HONG KONG, Dec 5 Renault has won
approval from Beijing authorities to begin Chinese production in
a $1.3 billion joint venture with Dongfeng Motor Group
, the carmakers said on Thursday.
The green light activates long-standing plans by the French
carmaker to introduce its own locally assembled models in China,
building on the presence of alliance partner Nissan and
its existing venture with Dongfeng.
The 50-50 partnership "will allow Renault to deploy its
ambitious strategy in the world's largest automotive market",
the French company said in a statement.
Renault is a latecomer to China, where fast-growing demand
for cars has helped peers including PSA Peugeot Citroen
and Volkswagen to offset some of the lost
sales during a six-year European market slump.
A total of 19.3 million vehicles were sold in China in 2012,
against about 14.4 billion in Europe.
To build a Chinese presence for the Renault brand, Chief
Executive Carlos Ghosn has been forced so far to rely on imports
from the Renault Samsung Motors division in South Korea, led by
its Koleos sport utility vehicle (SUV).
The rubber stamp from China's National Development and
Reform Commission comes more than nine years after Renault and
Dongfeng first announced plans for a joint venture.
The latest delay in winning final approval - which Renault
had previously expected by the end of 2012 - means that
production is unlikely to start before late 2016.
The new venture is good news for Renault's growth prospects
but could complicate efforts by ailing French rival Peugeot to
expand its own partnership with Dongfeng.
"We struggle to see how a tighter relationship with Renault
will help Peugeot in its negotiations for a deeper alliance,"
Barclays analyst Kristina Church said.
"The agreement sends a positive signal to the market in
terms of Renault's expansion plans in China."
Renault shares were little changed at 61.58 euros at 1307
GMT, while Peugeot was down 1.7 percent at 11.91 euros.
Peugeot, which has said it is seeking a deeper alliance with
China's second-biggest automaker, has discussed a capital
increase in which the French government and Dongfeng would take
significant minority stakes, sources have said.
A Peugeot spokesman declined to comment on the
Nissan, 43.4 percent-owned by Renault, has become Dongfeng's
most lucrative partner in the decade since their venture was
created, with explicit provisions for its eventual extension to
Joint production came to 1.25 million vehicles last year and
accounted for 59 percent of the Chinese carmaker's first-half
net profit, according to Citi analysts.
The new operation, Dongfeng Renault Automotive Co, will
produce cars and engines under both companies' brands, with
initial annual capacity of 150,000 vehicles. It will also cover
research and development, purchasing and marketing.
The venture will launch with a total investment of 7.76
billion yuan ($1.3 billion), Dongfeng said in a filing. More
details are due to be announced at a Dec. 16 signing ceremony.
At the Beijing auto show in April last year, Renault showed
a Talisman model adapted for China from Renault Samsung's SM7
sedan. The French carmaker also plans to produce an electric car
and an SUV in the country, sources said at the time.
($1=6.0916 Chinese yuan)
(Editing by Kenneth Maxwell and David Goodman)