Why did Renault exit the Chinese market? Who will be next?

After Citroen exit the Chinese market by selling off Changan PSA shares at the end of last year, another group reported the same “bad news” yesterday.

On April 14, Dongfeng Motor Group announced on the Hong Kong Stock Exchange that in view of the decline in the domestic automobile market and the operating conditions of Dongfeng Renault, both the Company and Renault planned to restructure Dongfeng Renault.

According to the announcement, Dongfeng and Renault reached a preliminary intention, Renault plans to transfer its 50% equity of Dongfeng Renault to the company, and Dongfeng Renault will stop Renault brand related business activities.

Next, Dongfeng Motor Group will transform and upgrade Dongfeng Renault, but the specific plan is still to be announced after further implementation. For the 300,000 customers who currently own their cars, Renault plans to provide follow-up services through the network of Renault dealers and alliances.

Last year, Dongfeng Renault sold only 18,600 vehicles in the Chinese market, a year-on-year decrease of 63.1%.

At the same time, Dongfeng Renault’s income not only declined year by year, but its pre-tax profit was also negative last year, and its losses were increasing.

To this end, Dongfeng Renault chose to withdraw from the Chinese market at this time, to put an end to losses.

It is worth noting that after the announcement, Renault Group also immediately released a new strategy in China, which clearly stated that the group will focus on light commercial vehicles and electric vehicles in China in the future.

In the field of fuel-powered passenger cars, Renault may transform into a “supplier” role, supplying parts and components to Dongfeng Renault after Dongfeng takes over, and providing diesel engine licenses to Dongfeng Motor Co., Ltd.

Withdrawal does not mean giving up the Chinese market?

A family of 8 years and a family of 7 years, Changan PSA and Dongfeng Renault, which have entered the Chinese market successively, finally fell to the same finish line.

From the peak of 72,000 in 2017, to 50,000 in 2018, and to 13,600 last year, this “cliff-like” downward curve is the most critical reason for Dongfeng Renault’s “stop”.

However, with Changan PSA, which had dropped from four-digit sales to three-digit sales earlier, Dongfeng Renault’s “transformation” at this time is still timely.

As the PSA Group has repeatedly emphasized-“The Chinese market is the focus of the DS brand’s global development strategy deployment, the DS brand will not withdraw from China”, the Renault Group said that this time it is only a strategic adjustment in China, and the Renault brand will still appear in light commercial vehicles in the future. And electric vehicles.

In fact, during the seven years of development of the Chinese market, the localization of Dongfeng Renault is not as fast as other competing products.

Coupled with the lack of product competitiveness and other issues, its sales in China have been difficult to improve.

At the same time, its been difficult for Renault to establish a clear brand image in the Chinese market.

Prior to this, Dongfeng Renault only relied on the two SUVs of Keleijia and Keleiao to support it. Until the arrival of Carrepin in October last year, Dongfeng Renault’s product line was not updated.

Perhaps it was the increased uncertainty in the external environment caused by the outbreak that prompted Renault to make the above decision more decisively.

Kung Fu Motor believes that the marginalization of Dongfeng Renault actually reflects the problems of the Renault-Nissan-Mitsubishi alliance. Dongfeng Nissan’s success in the Chinese market, but Dongfeng Renault did not make good use of resources.

From the new framework agreement announced by the Renault-Nissan-Mitsubishi Alliance in February this year, a sight of change?

According to the agreement, the alliance will jointly create a leadership-partnership cooperation model. For example, in terms of market area, the alliance’s benchmarking company in the Chinese market is Nissan, the benchmarking company in the European market is Renault, and the benchmarking company in the Southeast Asian market is Mitsubishi Motors.

In other words, Renault’s weakening in the Chinese market is actually predictable.

Who will be the next one?

According to the Renault Group’s future strategy in China, in addition to focusing on the joint venture with Brilliance, the company will continue to strengthen cooperation with Nissan and Dongfeng in the joint venture project of Yijiete New Energy Automobile Co., Ltd. for development of electric vehicles.

Compared with DS, Renault’s transformation is obviously more practical and more promising.

But one of the questions that people cannot help thinking is, why are the French car companies currently opting out? Who will be next?

The failure of a brand must be the result of a combination of factors. There are many reasons; product positioning, brand image, marketing channels, communication methods, etc. But the point is that French car companies never seem to understand the needs of Chinese consumers.

This can be seen from the shrinking market share of French cars in recent years. Data show that in 2019, the French car market share fell to 0.7%.

Facing the reality that the market share is declining, the choices before the French car companies seem to be less. Like PSA, which is merging with FCA, its chairman Tang Weishi also said that he must find “a new plan to stay in the Chinese market”, otherwise the final fate will be similar to that of Renault.

It is worth questioning that after Renault, will other brands choose to withdraw next?

There is no doubt that there will be more companies that exit the Chinese market.

Especially those car companies whose sales in recent years have not reached the “50,000 units” line of life or death, or will soon be out of the car market affected by the epidemic and exacerbating the crisis.

In recent years, the competition in the auto market has intensified, and the collapse or withdrawal of relatively weak brands has actually been familiar to us.

Behind this phenomenon, there are reasons for the deep adjustment of the structure of the automobile market, as well as reasons for the enterprise itself.

Why do some companies become stronger in the crisis, and why do some face the fate of being eliminated or merged and reorganized?

Behind this is actually from the company’s insight into market demand, consumer attitudes and R&D investment and other aspects.

This Renault’s withdrawal will undoubtedly sound a wake-up call for those nearly “marginalized” car companies, and also heralds that a new round of reshuffle in the Chinese car market is coming.

Author: Nabeel K
Email: nabeel@wheelsjoint.com

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