Renault and Nissan have signed a cooperative agreement with Dongfeng Motor Group. Nissan and Renault will each own 25% of the new company, with Dongfeng owning the remaining 50%. The new business venture, known as eGT New Energy Automotive Company, will focus on building an electric car for the Chinese market that sells for the equivalent of $8,000 — a price point that will allow it to compete with the gasoline-powered cars positioned at the low end of the Chinese automotive market.
Nissan has been trying to sell its LEAF — the best selling electric car in history — in China for years without much success, as that country’s taxes on imported cars make it too expensive. The new company intends to jointly design a new small SUV that operates solely on battery power. The car will then be built by Dongfeng.
Dongfeng currently produces the Kadjar SUV, which is sold as a Renault, and the Teana sedan, which is marketed under the Nissan label. Dongfeng has partnerships with several other car companies. In 2014 it acquired a 14% stake in Peugeot and makes Aircross SUVs and Picasso sedans that are sold as Citroens in China. It also partners with Honda to make the Civic and Kia to make its KX Cross cars.
China is pushing manufacturers to build more electric vehicles. So far as anyone knows, that program will require all car companies to make enough so-called new energy vehicles to equal “8%” of their total in-country sales by the end of next year. Battery electric cars will earn more credits than plug-in hybrids and traditional hybrids may not qualify for credits at all. Companies that do not meet the targets will be required to purchase credits from companies that have an excess available.
The program is very similar to the system set up by the California Air Resources Board almost a decade ago. California is also targeting 8% of sales for qualifying electric cars. The car companies have complained bitterly that the proposal is too aggressive and there have been some signs that China may adjust the program somewhat. The final regulations are expected to be released at the Frankfurt auto show next month.
The Chinese government plans to increase the annual output of new energy vehicles to 2 million units by 2020. They are expected to account for more than 20% of new car sales in China by 2025 according to the latest proposals from the Ministry of Industry and Information Technology.
Source: Bloomberg New Energy Finance
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