Va va voom! Renault is planning to launch a joint venture to build cars in China. That will strengthen its foothold in China, adding to a strategic alliance it has there with Japan’s Nissan. And who can blame the French company? In the first half of 2013, car sales in China jumped 17 per cent year on year. In spite of recent wobbles in the financial sector, that growth is expected to remain in double digits for the full year. China’s car market still looks attractive against sales growth in the US and Europe.

Yet results have been chequered for carmakers already present in the Middle Kingdom. Success, it seems, comes for participants with a niche, or those with scale. True, overseas names and joint ventures, such as the one Renault plans to embark on with China’s Dongfeng Motor once it receives approval from the authorities, have been taking share from local brands over the past five years. Volkswagen, helped by its joint ventures with FAW and SAIC Motor, has raised its share of the market by 4 percentage points from 2010 to a fifth of the market (by unit sales). Meanwhile, Chinese carmaker Chery has seen its 5 per cent market share slip to just under 3 per cent over that period. SAIC’s own brands have struggled to grab more than 2 per cent of the market.

The kind of scale achieved by VW in China has helped the German company obtain a return on capital employed of more than 50 per cent at its FAW plant, compared with 21 per cent for VW overall, according to Macquarie. It estimates that local component sourcing helps VW achieves an impressive 15 per cent margin on earnings before interest and tax at its China JVs.