Dongfeng Motor Corp, the State-run automaker preparing for an overseas listing, will build a long-awaited passenger car joint venture (JV) with French partner Renault in the nation's south, a source has revealed.

Dongfeng, based in the central Hubei Province, obtained the project with Renault by beating De'long, an industrial and investment firm registered in Shanghai, said the source, who refused to be named.

He said the JV will be located in Shenzhen, a pioneer of China's reform and opening up campaign in Guangdong Province, with strong backing from the local government.

"Both parties will have a 50 percent stake in the joint venture with a planned annual capacity of 300,000 Renault cars," the source told China Daily. No official details have been revealed.

Last month, a Renault executive said that the company will announce an overall China strategy during the summer.

The Dongfeng-Renault venture in passenger cars follows a rational line as the pair have clinched a deal in trucks. The French automaker's Japanese ally - Nissan Motor - has also teamed up with the Chinese firm.

The trio want to build a "triangle of synergy" in China, the world's fastest-growing vehicle market.

In January, Dongfeng and Renault agreed to create a JV based on the former's affiliate in southern China's Guangxi Zhuang Autonomous Region to make Renault trucks.

Last July, Dongfeng and Nissan - 44 percent owned by Renault - created a US$2 billion venture in Wuhan, capital of Hubei.

The JV, the largest Sino-foreign automobile operation, produces Nissan cars and Dongfeng trucks and buses.

Dongfeng also has diesel engine JVs with both Renault and Nissan in China.

Renault set up a JV in 1994 in Hubei with another Chinese partner to assemble its Trafic wagon.

But the partnership has almost come to a standstill as a result of sluggish sales over the past years.

Renault and De'long were in talks last year about attempting to revive the venture by introducing Renault's Kangoo car.

When the project in Shenzhen with Renault is established, Dongfeng will have five foreign car JV partners, the biggest number by a single Chinese automaker.

Dongfeng now also has car JVs with France's PSA Peugeot Citroen, Japan' Honda and Kia from South Korea's Hyundai Motor.

Dongfeng Automobile Industry Investment Co Ltd, 57.14 percent owned by Dongfeng Motor Corp, is expected to launch an initial public offering in Hong Kong during the fourth quarter of this year to raise some US$1 billion.

"It is understood that the company's listing will be held so money can be pumped into the car joint venture with Renault in the short term," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

"In the long term, the expected overseas listing could help Dongfeng, as a typical State-owned enterprise, speed up internal restructuring and improve corporate governance."

The remaining stake in Dongfeng Automobile Industry Investment Co Ltd, which was set up last year, is controlled by China's four State-owned assets management companies - Huarong, Cinda, Orient and Great Wall - and the China Development Bank.

Dongfeng Motor Corp has two home-listed arms - Dongfeng Automobile Co Ltd and Dongfeng Electronic Technology Co Ltd, which have been enclosed in the Nissan JV.

China's passenger car market is mainly controlled by the world's other auto giants, such as Volkswagen, General Motors, Honda and PSA, which all have one or more JVs with local partners.

Total sales of Chinese-made vehicles surged by 34 percent to 4.39 million units last year, including almost 2 million passenger cars.

(China Daily May 11, 2004)