French carmaker Renault and Chinese automaker Dongfeng Motor Group are expected to seal a planned joint venture later this month worth about 10 billion yuan ($1.6 billion), according to Reuters.
Under the venture, Renault will produce 150,000 cars at its first plant in China, starting with sport utility vehicles and minivans. The move will help Renault depend less on Europe’s car market, which the firm expects to contract over the next two years. But more importantly, this could be Renault’s first foothold in China’s still underdeveloped electric car market.
Last month, Renault’s chief operating officer Carlos Tavares said that the Chinese government had requested the firm bring electric vehicle technology to China (paywall) as part of its approval of the joint venture. Tavares said the firm, which says it commands 51% of Europe’s electric car market, just has to decide which of its four electric cars currently on sale (the Zoe, Fluence, Twizy, and the Kango0) to bring.
China is the world’s biggest market for vehicles, and many have been waiting for Chinese demand for electric cars to take off as well. Central policy planners have made electric car promotion a national priority in hopes of lessening pollution and the country’s dependence on oil-based fuels. Local authorities have put in place subsidies for electric cars and benefits like exemption from license plate lottery systems that limit the number of cars in a city.
Despite the effort, demand has been lackluster. That’s because many Chinese consumers can’t yet afford expensive, high-tech cars and China also lacks enough charging stations to make owning an electric car convenient. But the market is still growing and Chinese carmakers are banking on mainland consumers, as they grow wealthier, to eventually gravitate toward green cars. According to consultancy firm McKinsey, China will produce 273,150 electric cars a year by 2017. That’s up from 12,552 units in 2012.