Dongfeng Motor to sell 50% stake in joint venture with Honda

[HONG KONG] State-owned Chinese automaker Dongfeng Motor is selling its 50 per cent stake in a joint venture with Honda Motor, in a reflection of the country’s rapid shift away from petrol-powered vehicles.

Guangzhou-based Dongfeng Honda Engine was founded in 1998 and produced engines for Honda vehicles in China. Dongfeng listed its stake for sale on the Guangdong United Assets and Equity Exchange on Monday (Aug 18), according to the exchange website. A reserve price has yet to be set, and the listing deadline is Sep 12.

The company’s assets were valued at 5.4 billion yuan (S$964 million) last year, when it recorded a loss of 227.8 million yuan, and it has debts of 3.3 billion yuan, according to audited results included in the listing document. The factory employs 827 workers.

The plan to divest the business highlights how cut-throat the Chinese market has become in its fast-paced shift to electric vehicles (EVs). Japanese brands, including Honda, Toyota Motor and Nissan Motor, have been caught flatfooted and now face the tough task of trying to make up ground lost to domestic champions such as BYD.

Honda slashed production capacity at the Guangzhou engine plant by half earlier in the year, according to Japanese media reports. It set up an EV production line in the same city with another Chinese automaker partner, which started operations late last year.

Competition has intensified among Chinese firms, too. Dongfeng, which has joint ventures with both Honda and Nissan, has seen annual deliveries slump from a peak of 3.8 million vehicles in 2016 to 1.5 million last year, according to data from the China Automotive Technology and Research Center. BLOOMBERG