Renault Sees Strong China Potential Despite Late Arrival

Renault still sees plenty of growth in the Chinese vehicle demand, the French carmaker said as it prepared to cut the ribbon on its first assembly plant in the world's biggest auto market, where growth has slowed over the past year. Inaugurating the 870 million euro ($942 million) factory in Wuhan, eastern-central China, Jacques Daniel, head of Renault's joint venture with local partner Dongfeng, said capacity could double or ultimately even triple from its initial output of 150,000 vehicles per year.

"Are we arriving after the battle? Not at all, because this market is not going to stop," Daniel told reporters ahead of the opening ceremony. "Entering a market of 20 million vehicles a year is no bad thing for a manufacturer."

Renault has until now remained a marginal player in China. Unlike Nissan, its 43.4 percent-owned Japanese affiliate, Renault has lacked any local production capacity, relying instead on less profitable imports such as the South Korean-built Koleos sport utility vehicle.

But its arrival as a manufacturer -- one of the last among major Western automakers -- coincides with a weakening of the Chinese economy and car demand.

After an abrupt slowdown in mid-2015 and partial recovery later in the year, the market is likely to grow 4-6 percent in 2016, Renault-Nissan predicts, a healthy clip by European standards but a far cry from the double-digit expansions of preceding years.

Renault's catch-up strategy is to bet on the SUV segment, however, which accounts for one-third of the Chinese market and is still growing at a rate approaching 50 percent.

On its first production line, employing some 2,000 workers, the Dongfeng-Renault plant is about to begin assembling the French brand's Kadjar compact SUV, followed by a larger version later this year and an electric Fluence sedan in 2017.

"A second [line] would very easy to install," Daniel said on the eve of the inauguration. "And we have enough space for a third if needed."

Renault is already in the process of increasing its China sales network to 150 dealerships from 125 last year, he added, and would add more with any future plant expansions.

(Writing by Laurence Frost, editing by Louise Heavens)