Autos

French automaker Renault is 'confident' about the China market despite falling car sales

Key Points
  • China's auto industry is struggling to sell new cars but French automaker Renault is confident about the market's long-term prospects, its chairman of China region, Francois Provost, told CNBC.
  • The market downtrend started in the middle of last year and Renault expects a full-year decline of about 5% in sales, according to Provost.
  • Auto sales declined 16.4% in May from the same month a year earlier, according to the China Association of Automobile Manufacturers, Reuters reported. That was the 11th consecutive month of decline, according to the news wire.
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Electric vehicles are a priority for us in China: Renault

China's auto industry is struggling to sell new cars but French automaker Renault is confident about the market's long-term prospects, according to a senior executive.

The market downtrend started in the middle of last year and Renault expects a full-year decline of about 5% in sales, according to Francois Provost, senior vice president, chairman of China region at the company.

"We remain confident about the long-term trend for the Chinese market," he told CNBC's Geoff Cutmore and Arjun Kharpal at the World Economic Forum in Dalian, China.

Provost explained it was hard to determine the key reason for the sales decline but conversations with Renault dealers and salesmen indicated that customers were hesitating to buy new cars.

"I cannot explain in details the root cause but, for sure, our customers are hesitating to buy, and this explains most of the volume decrease," he said, adding that it is likely that much of the uncertainty comes from the ongoing trade tensions between the United States and China.

Last month, China reported the worst-ever monthly sales drop that deepened worries over the economic slowdown in the world's second largest economy and the impact of the trade war with Washington.

Auto sales declined 16.4% in May from the same month a year earlier, according to the China Association of Automobile Manufacturers, Reuters reported. That was the 11th consecutive month of decline, according to the news wire.

U.S. President Donald Trump met his Chinese counterpart Xi Jinping on Saturday during the Group of 20 summit in Japan, where the two leaders agreed to halt further tariffs on each other's goods, and return to the negotiating table.

Provost said he hoped that move would boost consumer confidence in the Chinese auto market.

Still, Renault, which has three joint ventures in China, plans to sell 550,000 vehicles in China in 2022. Last year, the company said it sold more than 216,000 vehicles in the country — about three times more than its 2017 sales.

A big priority for the French automaker in China is the electric vehicles market.

Favorable government policies have given pure battery-powered vehicles as well as hybrid cars an advantage despite an overall slowdown in auto sales. Last year, electric car sales in China jumped almost 62% to 1.3 million vehicles. For 2019, it is predicted that electric vehicle sales could hit 1.6 million.

Provost said that the electric vehicle market will "grow a lot in the coming years" due to a combination of strong government support as well as growing confidence among customers toward those types of cars.