Korea Figures Big in Renault’s Foray Into China

When Renault Group held the world debut of its all-new Koleos midsize CUV at the Beijing auto show in April, it signaled a new strategy for penetrating China, Korea, Australia and the emerging markets of Asia.

The all-new Koleos, called the QM5 in Korea, was designed at the Renault Design Asia studios of Renault Samsung Motors and developed at RSM’s technical development center in Kihung, near Seoul.

Significant to Renault’s aims in Asia is that the French automaker acquired the design and R&D center in 2000 when it purchased the assets of Samsung Motors. The fledgling Korean company had flopped and Renault picked it up for a fire-sale price of $565 million. The purchase included not only the Kihung R&D facility but also a modern engine facility and one of the world’s most high-tech production plants that had been designed and launched by Nissan.

In 2013 Renault Group renamed the design center and gave it development authority for all Renault vehicles in the Asia-Pacific region.

In 2013 it was charged with designing the Koleos and the SM5 midsize sedan. (The SM5 Nova debuted in Korea in 2015. It is sold as the Renault Latitude and Safrane in export markets).

The Koleos shown at Beijing is one of Renault Design Asia’s first fruits.

The new Wuhan, China, plant of the Dongfeng Renault Automotive joint venture will produce the Koleos for China, although it currently has its hands full producing the slightly smaller sister of the Koleos, the Kadjar SUV, which launched in February.

The Koleos will be assembled at RSM’s plant in Busan, Korea, and sold in Korea as the QM5. It will be badged the Koleos for export to other markets.

RSM will supply Wuhan with some parts for the Koleos, according to a Renault spokesperson at Renault Asia Pacific headquarters in Hong Kong.

Dongfeng Renault JV Takes Wraps Off EV Targeted for China

Featured at the Dongfeng Renault JV’s exhibit at the Beijing show was the battery-electric Dongfeng Fengnuo E300, the Chinese version of the Renault Fluence EZ. RSM renamed the Fluence EZ the SM3 ZE after transferring global production of the EV to Busan from Turkey in 2013. The Korean plant will continue to build the SM3 ZE when the Fengnuo E300 joins the Kadjar at the Dongfeng Renault plant in Wuhan.

The Fengnuo E300 will be marketed in China under the Dongfeng brand, not Dongfeng Renault. This was written into the agreement when Renault and Dongfeng signed their 50/50 JV pact in 2013.

The automakers believe this approach will appeal to Chinese consumers who have begun showing intense loyalty to Chinese-branded vehicles. Dongfeng itself and the Chinese government also insisted on the Dongfeng branding.

This loyalty mostly is economically driven because almost every domestically made passenger vehicle in China sells for considerably less than global automakers’ brands.

Dongfeng Fengnuo E300 builds will not start in 2017, the Renault Asia Pacific spokesperson says.

RSM has a 28-member team embedded at Dongfeng Renault’s Wuhan plant to provide expertise in the areas of manufacturing, R&D and design.

“The 28 Korean employees provide a good interface between French and Chinese staff members as they are already familiar with Renault’s corporate culture, decentralized management structures and with Asian culture,” the spokesman says.

Renault’s Alliance Partner Nissan Also Present in China

Another vital piece of the new strategy fell into place April 1, when Francois Provost was named president of Dongfeng Renault after four years as CEO of RSM. He also was promoted to senior vice president of Renault Group, responsible for China and neighboring regions.

Synergies between RSM and Dongfeng Renault are being exploited to the fullest, but the Renault-Nissan Alliance cross-shareholding partnership has its own presence in China: Dongfeng Nissan Passenger Vehicle, founded in 2003.

It is struggling to sell the Venucia Chenfeng E30, the Chinese version of the Nissan Leaf, the world’s best-selling all-electric vehicle.

Carlos Ghosn, CEO of both Renault and Nissan, personally presented the all-new Koleos in its world debut at the Beijing show. He later conceded to reporters he was disappointed with the anemic sales (1,273 units in 2015) of the Venucia Chenfeng E30 since its Chinese launch in September 2014. Venucia is a sub-brand of Dongfeng Nissan.

Ghosn attributed the EV’s poor sales performance to its price, which he said was undercut about 25% by Chinese brands. He also said the Venucia E30 had insufficient range.

Ghosn said those issues are being addressed, but he noted Renault Group also is working on a low-cost, lower-tech EV for the Chinese market, adding it might see success in India as well.

Some analysts believe this low-cost EV is being developed at RSM’s technical center in Kihung. RSM declines comment.

Another part of RSM’s evolving strategy involves Korea-based battery-pack maker LG Chem. The company’s Ochang, Korea, R&D center manages battery, battery-pack and electric powertrain development and support for EV producers around the world.

In 2014 LG Chem and Renault signed an agreement to jointly develop long-range, high-energy-density lithium-ion batteries for advanced battery-electric EVs and plug-in hybrids.

In Korea, LG Chem delivers the battery packs to RSM’s Busan plant, where they are incorporated into the SM3 ZE.

LG Chem’s new battery plant in Nanjing, China, is expected to supply identical packs for the Fengnuo E300 to be built at Dongfeng Renault’s Wuhan plant.

PAGE BREAK: RSM Looks to Koleos to Kick-Start Domestic Sales, Exports

RSM hopes the new Koleos will give its free-falling export sales a much-needed boost and shore up flagging domestic sales.

In 2015, the model sold 6,804 units as the QM5 in Korea, a drop of 24% from 8,947 a year earlier. Exports plunged 53% last year with 21,754 overseas deliveries, compared with 46,095 prior year. Its prospects in China are unclear.

The SM3 ZE was another story for Korea in 2015. The EV’s sales improved 238% to a Korea-leading if minuscule 1,043 units, compared with 309 in 2014. RSM’s new CEO, Park Donghoon, is confident domestic sales will top 2,000 this year. It is sold only in Korea and there are no current plans to export it.

The Chinese iteration of the SM3 ZE, the Fengnuo E300, faces competition from a plethora of all-electric EVs in China.

For tax-rebate and government-incentive purposes China classifies its EVs and PHEVs New Energy Vehicles. If it can’t plug in for a recharge it’s not an NEV and doesn’t get the government subsidies.

The Chinese market has more than 150 NEVs and about a third are all-electric. A total of 330,000 NEVs, including 247,482 battery EVs and 83,600 PHEVs, were sold there last year.

Of the leading 20 pure EVs sold in 2015, the Kandi EV produced by Kandi Technology Group topped the list with sales of 16,736 units. The diminutive urban EV sells for just RMB ($6,400).

The bottom 10 on the list sold less than 3,000 vehicles and the bottom five sold less than 500.

Bringing up the rear was the BYD T3, which sold just 106 units.

Color Chinese Market Green

Some analysts and pundits question why Renault would choose to join China’s crowded EV market. One reason is that all global automakers active in China are being pressured by national and local governments to add pure EVs and PHEVs to their China portfolios.

Also, China’s stringent fuel-economy and emissions standards necessitate adding EVs and PHEVs to the automakers’ China fleets.

Not mandated for global automakers is grabbing a piece of the heavily subsidized NEV market, for which the government has set an annual sales goal of 5 million units by 2020. Most analysts think 2 million deliveries is more likely, but even the lower number is a colossal increase from the 330,000 NEVs sold in 2015 (247,482 battery EVs, 83,610 PHEVs).

RSM in Korea, while staying out of the limelight, clearly is a significant player in Renault's hopes and ambitions for China.

Ground was broken for the new Dongfeng Renault assembly plant even before the ink was dry on the 2013 JV agreement. The 150,000-unit-capacity plant was completed and on line within two years of the agreement being signed.