French carmaker Renault has entered into an agreement with Chinese Dongfeng Motor (DFG) to create a new joint venture company, Dongfeng Renault Automotive Company (DRAC), with an investment of EUR870m for localized production in China.
This move by both the companies follows the final approval for the proposal by the National Development and Reform Commission of China (NDRC) on 2 December 2013.
Both the parties will hold a 50% stake each in the new JV.
DRAC will establish a new manufacturing plant in Hubei province, Wuhan, with an initial production capacity of 150,000 vehicles per year.
To be opened in 2016, the new plant will have the potential to double the capacity in the near future. It is expected to create 2,000 new direct jobs.
DRAC will start production with a new range of crossover vehicles under the Renault brand. At a later stage, the new joint venture will introduce a range of products under a local brand with sales of locally produced vehicles commencing in 2016.
DFG chairman Xu Ping said that the launching of the Dongfeng Renault project symbolizes the start of a comprehensive cooperation between DFG and the Renault-Nissan Alliance.
"We expect Dongfeng Renault will bring fascinating products and customer satisfactions for China auto market. We expect the success of Dongfeng Renault," Ping added.
Renault chairman and CEO Carlos Ghosn said: "Dongfeng and Renault, as parent companies of DRAC, have been closely working together to ensure the future sucess of DRAC. Our partnership agreement is part of a long term strategy."