French automaker Renault said Tuesday that it would start building only electric vehicles for China's huge passenger car market, dropping conventional internal combustion engines as well as its joint venture with local manufacturer Dongfeng.
The strategy shift comes after years of sluggish sales in China, where Renault hoped its 50-50 venture with Dongfeng, announced in 2013 and focused on a factory in Wuhan, would allow it to make inroads quickly.
But the coronavirus outbreak in Wuhan forced the factory to shutter, just as Renault was wrestling with slowing growth worldwide and a cashflow squeeze that has prompted ratings agencies to cut its credit ratings to "junk" status.
"We are opening a new chapter in China. We will concentrate on electric vehicles and light commercial vehicles, the two main drivers for future clean mobility," Renault chairman for China operations, Francois Provost, said in a statement.
The automaker will transfer its stake in the DRAC venture to Dongfeng, which will stop marketing the Renault brand. No financial details of the transaction were disclosed.
To bolster its all-electric push, Renault said it will "reinforce" its eGT venture, also formed with Dongfeng as well as Renault's Japanese alliance partner Nissan, to further development of its City K-ZE model, a low-cost crossover vehicle that Renault plans to launch in Europe next year.
Renault said its other Chinese venture, Jiangxi Jiangling Group Electric Vehicle Co., aimed to have four core models for the Chinese market by 2022.
It said 860,000 electric vehicles were sold in China last year, making it the largest market in the world -- though they were still just a small fraction of the 25 million vehicles of all types bought.
Renault sold just 180,000 cars, both traditional and electric, in China in 2019, down from 217,000 the previous year, and representing less than one percent of the overall market.
It said electric vehicles are forecast to account for 25 percent of the Chinese market by the end of this decade.
Renault chairman Jean-Dominique Senard said this month that he hoped to get up to five billion euros ($5.5 billion) in loans guaranteed by the French state to help the automaker weather the coronavirus crisis, which has seen sales nearly grind to a halt in affected markets.