Carmaker Renault is quitting its main passenger car business in China following a long trend of weak sales exacerbated by the COVID-19 outbreak.
Dongfeng had been anticipating Renault’s potential exit from the venture as long as a year ago, a banking source familiar with the matter told Reuters.
The Renault–Dongfeng venture sold only 18,607 cars in 2019, far below its annual capacity of 110,000, and reported an operating loss of more than 1.5 billion yuan ($212 million).
“It’s increasingly difficult for some marginal brands to reach the minimum volume threshold in China,” said Paul Gong, an auto analyst at UBS, in comments to The Wall Street Journal. “Rather than further spending money to build the brand image and dealer network, exiting is probably the right strategy.”
After growing steadily for decades, China’s auto market rolled over in 2018, with reports blaming things such as the economic downturn, tighter emission standards, and the rising popularity of ride-sharing platforms.
The historic drop in auto sales at the beginning of 2020 in China has been widely attributed to decreased showroom traffic and buyer demand amid the outbreak caused by the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus and which causes the disease COVID-19.
Renault said it plans to retain some operations in China, the world’s biggest vehicle market.
“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 Francois Provost, chairman of the China region of Groupe Renault, in a statement.
