Renault seen facing long, bumpy road in Asia

Renault seen facing long, bumpy road in Asia

TOKYO (Reuters): Renault SA's Asian push gathered steam this
week with news of talks to buy Samsung Motors and reported plans
to build cars at Nissan Motor Co's Southeast Asian plants, but
analysts warn the road ahead will be long and bumpy.

Only two days after announcing it was in talks to buy all or
part of South Korea's troubled Samsung Motors, France's Renault
made headlines again with a Japanese newspaper report that it
plans to use affiliate Nissan Motor's factories in Thailand,
Malaysia and the Philippines.

The financial daily Nihon Keizai Shimbun said that, taking
advantage of Nissan's underutilized Southeast Asian capacity,
Renault would begin production as early as 2001 with the aim of
building 20,000 to 30,000 vehicles annually in each country.

A Nissan spokesman said the two automakers would cooperate in
Asia but no specific plans had yet been decided upon. Renault's
Tokyo office was closed for New Year's holidays.

For Renault, with aspirations of becoming a top global
automotive player, the further forays into Asia are a natural
next step after its purchase of a 36.8 percent controlling stake
in heavily indebted Nissan last year.

But while analysts say Renault is right to get into Asia and
should begin its preparations now, they caution that selling cars
in the region has never been easy and some worry the French
automaker's strategy as reported is overly ambitious.

"Even if the Asian economies recover as hoped, Renault does
appear to be a little too optimistic," said Ryuichiro Inoue, an
analyst at Mitsubishi Research Institute.

"On the one hand it's natural to build on Nissan's foundations
in Asia but there is the problem that Nissan has never been a
strong player in Asia," he said.

Cautioning that Asian car markets were still primarily focused
on inexpensive commercial vehicles, analysts said Renault,
primarily a passenger car maker, would need plenty of patience
before it could sell 20,000 to 30,000 vehicles annually in each
of the three markets.

The Nihon Keizai Shimbun reported that Renault's compact Clio
would be made in Thailand, the Megane sedan and its sister the
Megane Scenic minivan in the Philippines and the Kangoo
recreational vehicle in Malaysia.

Investors took the report as positive for Nissan, lifting its
share price 7.86 percent on Thursday to a close at 453 yen.

Analysts said Renault and Nissan would have to work hard on
building new relationships with suppliers for Renault's models,
as a significant portion of parts would have to be procured
locally to keep costs down.

In the key Thai market, Nissan has a 25 percent stake in Siam
Nissan Automobile Co Ltd (SNA) with a local partner holding the
rest. The Thai factory has an annual production capacity of
100,000 vehicles but only made 20,000 in 1999.

In the Philippines, Nissan has a 23 percent stake in Nissan
Motor Philippines Inc, while Japanese trading house Marubeni Corp
holds 17 percent and local companies the remainder.

In Malaysia, Tan Chong Motor Holdings holds 70 percent of Tan
Chong Motor Assemblies, which makes Nissan vehicles but in which
Nissan holds no equity stake.

The latest production and capacity figures were not available
for the Philippine and Malaysian plants, although a Nissan
spokesman said output had risen significantly last year from the
1998 levels of 8,000 and 5,000 vehicles, respectively.