France’s Renault inaugurates first factory in China

France’s car giant, Renault, has opened its first car manufacturing factory in China to become the last major car manufacturer to establish a plant in the world’s second biggest economy.

The announcement came on Monday as the French carmaker is bent on tapping into the world's biggest automobile market, AFP reported.

According to the report, the new facility, built through an investment of USD 1.2 billion in Wuhan, an automobile manufacturing hub in China’s central province of Hubei, is a joint venture with Chinese manufacturer Dongfeng and its initial production capacity has been estimated at about 150,000 vehicles a year.

Renault and Dongfeng have invested 7.6 billion yuan (USD 1.2 billion) in the plant, which spreads over a total area of 95 hectares (235 acres) and at present, employs 2,000 people.

Renault’s Wuhan factory is expected to start its operations by manufacturing Kadjar model, which is the French company’s latest crossover model, taking into account that crossover models are currently a favorite with Chinese consumers.

"We see this niche exploding in China, and it's not going to stop," said Jacques Daniel, CEO of the joint venture, adding, "We're arriving late, but with the right product."

The official, however, acknowledged that the current situation in Chinese market is challenging.

China's total automobile sales increased at their lowest pace in three years during 2015, as a result of slowdown in the country’s economy.

China’s economy, which is the world's second largest, grew only 6.9 percent in 2015, recording its slowest pace in 25 years.

Carmakers responded to low growth figures by slashing prices while some even cut production.

Meanwhile, the market for high-priced luxury cars has been also hit by a government crackdown on corruption and an austerity campaign, which was launched after President Xi Jinping took office three years ago.

The country, however, still remains "a growth driver for the global auto industry," according to CEO of Renault, Carlos Ghosn, who made the remark at the inauguration ceremony of the new plant.

Ghosn added that the factory is just a "first big step" for the development of the Dongfeng-Renault joint venture and for the overall growth of Renault.

China’s market is crucial to foreign auto makers, both as the world's largest car market and a key source of revenue outside Europe and the United States, but until now, the French firm has largely allowed its Japanese partner, Nissan, to take the lead.

Last year, Renault only sold 15,850 vehicles in China, showing a decrease of 50 percent compared to 2014 and accounting for a market share of less than 0.1 percent.

Ghosn, however, said China is a "core part of Renault's strategic plan," and that the company’s long-term goal was an ambitious market share of 3.5 percent.

US auto giant, General Motors, was the top foreign brand in China last year, delivering a record 3.61 million vehicles, to beat German rival Volkswagen, which is struggling with a global scandal over emissions cheating.

Renault's French rival, PSA Peugeot Citroen, which is long established in China and also has a joint venture with Dongfeng, with three factories in Wuhan, sells 700,000 units a year in the country.

Renault will start producing electric vehicles in Wuhan next year, and Ghosn said the firm was considering developing an "affordable" electric car aimed at Chinese and developing world markets.

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