WUHAN, Dec. 25 -- Another big name joined PSA Peugeot Citroen, Honda, Nissan, Kia and Volvo as a Dongfeng Motor Corporation partner last week, when French automaker Renault signed on the dotted line.
Renault sealed a 1.3 billion U.S. dollar 50-50 joint venture agreement with China's second largest automaker on Dec. 16. This allows Renault to assemble vehicles in China and provides easy access to the world's biggest auto market.
Foreign automakers must have a local partner to make cars in China. The policy was conceived in the hope that Chinese carmakers would absorb foreign technology and management expertise. After three decades, foreign brands dominate the market and Chinese brands are steadily losing ground and the rationale behind the joint-venture policy has come into question.
Foreign passenger cars took 73 percent of the market share from January to October, a small rise of only 0.4 percent from the same period of the previous year, according to the China Association of Automobile Manufacturers (CAAM).
As a late starter, China benefited from joint ventures and enormous profits were made from the sale of foreign branded cars but, according to Jia Xinguang of China Automotive Industry Consulting and Development, that's just half the story.
Zhong Shi, an independent auto analyst, holds the view that joint ventures hinder the development of local brands. If the government does not adjust or abandon the joint venture policy, the prospect for stronger local brands is gloomy, he said.