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Renault to head to US and China

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French carmaker Renault won't be able to rely for ever on partner Nissan's presence in China and the United States, the world's two biggest car markets, but it is right not to rush to conquer them itself.

Europe's third-biggest carmaker is scrambling to build up its presence in international markets, focusing on fast-growing emerging countries like Russia, Brazil and India as demand in Europe stagnates after the end of scrappage schemes.

 

Chief Operating Officer Patrick Pelata told Le Figaro on Monday that half of Renault's sales could come from outside Europe by 2013, up from 40 per cent today and 11 per cent in 1999.

But for the moment, Renault is holding back from China, a gold mine for European and US car makers emerging from a chastening crisis, and which last year overtook the United States as the world's biggest car market.

Nissan on Monday said it planned to double its China capacity to 1.2 million units per year by 2012, as it seeks 10 per cent market share, compared with around 6 per cent currently.

Carlos Ghosn, CEO of both Renault and Nissan, said Renault did not plan to start producing in China itself, although it could at some point join the joint venture Nissan has in place with local partner Dongfeng.

Ghosn has previously said Renault will tackle the Chinese market one day. Given booming sales there, it is not surprising

that some believe the company should be moving faster.

Barclays Capital analyst Kristina Church echoed the caution.

"At the moment China is still a very risky market for the mass manufacturers. They're probably waiting to see what's going to happen to the market in the next twelve months, if there are going to be capacity issues," she said.

ELECTRIC VEHICLE OPPORTUNITY

Renault's big push in conjunction with Nissan to lead the industry in electric vehicles (EVs) could spur the French carmaker on to launch itself in China.

Credit Suisse's David Arnold said: "China is going to be the most important EV market, and Renault-Nissan are going to be a major player in the EV field, given their investments."

When Renault does arrive in China -- beyond the handful of imported vehicles it sells every year -- it may be the first time the two alliance partners compete head on in a major overseas market, starting from comparable footings.

Church agreed: "Partly because so many car buyers haven't owned a car before, they're much more willing to be early adopters of new technology."

BACK TO THE USA?

Renault has also held off from a return to the United States where Nissan is already strong, but sources say the ambitious Ghosn is unlikely to neglect this market indefinitely.

In the 1980s Renault got its fingers burned, when it took over American Motors Corporation (AMC), then owner of Jeep, briefly producing the Renault-derived Alliance and Encore there.

Lacking the means to develop a range aimed specifically at the US market, Renault sold its AMC stake to Chrysler in 1987.

In 2006, talks to expand the current GM-Renault cooperation beyond commercial vehicles failed.

And most recently, at the height of the crisis in late 2008, Renault-Nissan held unsuccessful talks to buy Chrysler. The following year, Italy's Fiat bought into the US group.

Speculation has been rife that GM is looking for strategic investors to take part in the IPO expected before the end of the year, but Renault won't take part.

A source with direct knowledge said Ghosn wants a North American partner, but would only consider an equity deal once a solid commercial alliance was in place. There would be no time for this before GM's IPO.

However, the Renault source said the company would want an American partner, most likely GM, and a presence at some point.

Analysts think a US move would make sense, but, again, want Renault to proceed with caution: "At the moment there are more worries about the recovery in the US market not being as strong as people expected," said Barclays Capital's Church.

IHS Global Insight's Da Silva added: "They are in the same area of the market and fighting for the same customers. There's a limit to what the market can absorb."

He added: "If they want to become a world player they will definitely need to be present in the US, in China, but just going for the sake of going does not make a business case."