Renault is struggling to gain a foothold in China. First, it sold its joint venture with Dongfeng Motor in April 2020 because it was losing money. The company’s second joint venture, with Brilliance Auto, also did not perform well. Yicai Global has announced that it has filed for bankruptcy.
A week ago, the joint venture was not paying its staff salaries, which was a clear sign that something bad was happening at the company. It was expected: Brilliance Auto said it would no longer be able to pay its bills in November. The Chinese automaker has a debt of 52.4 billion RMB ($ 8.2 billion) that is sure to affect its other businesses, such as the Renault Brilliance alliance. Oddly enough, the company only sold Jinbei brand vans.
For a company struggling to return to black like Renault, this is a big blow. China is the world’s largest automotive market, and it’s an important source of income for companies that have managed to establish a good presence there, such as General Motors and the Volkswagen Group. The German automaker recently appointed Ralf BrandstÃ¤tter as the new CEO and board member for that country, showing just how crucial these operations are.
If Renault was right, it would help it get back to profit and invest more money in its Renaulution electrification plan. Perhaps the answer to these needs can be found in the company’s alliance with Geely, which we discussed on August 9.
Many aspects of this alliance only became clearer on December 21. While Renault will use Geely’s factories in China to produce plug-in hybrids for this market, Geely will use the Renault-Samsung factory in South Korea to export Lynk & Co. cars to the United States tax-free. In other words, Geely will allow Renault to access the Chinese market and Renault will help it to increase its presence in the American market.
As we said in August, this is a win-win deal that probably won’t hurt Renault for saying goodbye to Brilliance Auto. It will all depend on execution, which Renault has failed to deliver twice in the world’s largest car market. Hope the third time is the charm.