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.