TOKYO -- The Renault-Nissan alliance will join with Dongfeng Motor Group to produce compact electric cars in China as competition intensifies among American and European rivals that are also teaming with local partners to meet growing demand and tougher regulations.
Dongfeng will take a 50% stake in the new venture -- eGT New Energy Automotive -- with Renault and Nissan Motor investing 25% each, according to Tuesday's annoucement. The joint venture will be located in Shiyan, Hubei Province. The partners will develop an electric mini-SUV for the Chinese market using the French-Japanese alliance's jointly designed platform created for compact cars in India and other emerging countries.
BYD and other Chinese automakers have led the popularization of eco-friendly models in the country. Price competition is intensifying, especially for compact electric vehicles popular in major cities like Beijing and Shanghai. Such models sell for about half the price of Nissan's mainstay electric vehicle, the Leaf.
Nissan already is making electric cars for the Chinese market with Dongfeng at a jointly owned factory. The new venture, however, will focus on low-cost electric models to be built at Dongfeng's Shiyan factory. The companies plan to harness economies of scale by using existing facilities to produce compact EVs under several brands, including Renault, and shorten the period until sales begin.
In June, Chinese authorities began to let foreign automakers form up to three joint ventures with local companies, provided that the tie-ups focus on green vehicle production, relaxing a rule that allowed only two such partnerships. American and European automakers have jumped at the opportunity. Volkswagen recently signed an agreement with Anhui Jianghuai Automobile Group for its third Chinese joint venture, and Ford Motor announced a venture with Anhui Zotye Automobile this month as well.
Boosting capacity has become an urgent issue as the Chinese government is expected to introduce new environmental regulations as early as 2018. The search for a new partner and building new factories would take time, pushing back the start of electric car sales. For this reason, the Renault-Nissan alliance decided to broaden its relationship with Dongfeng to tackle rising demand for electric cars and stricter environmental regulations simultaneously.