China's Dongfeng exits joint venture with Honda to produce internal combustion engines
China's shift to electric vehicles has hit the production of internal combustion engines for vehicles. State-owned Dongfeng has put up for sale its 50 per cent stake in Dongfeng Honda Engine, a joint venture that produces engines for Chinese Honda models.
Here's What We Know
Information about the sale appeared on the Guangdong United Assets and Equity Exchange. Acceptance of bids is open until 12 September, but the minimum price has not yet been indicated.
Prospects of the deal are vague: the company, operating since 1998 in Guangzhou, is unprofitable. Last year it recorded a minus 227.8 million yuan (about €27 million) with a debt of 3.3 billion yuan (about €392 million).
Demand for internal combustion engines is declining. According to Japanese media, Honda has cut plant capacity by 50 per cent in early 2024. Japanese companies underestimated the pace of transition to electric cars in China and lost market share by relying on internal combustion engines.
Dongfeng itself is not going through the best of times. In 2023, the company sold 1.5 million vehicles compared to 3.8 million in 2016. There were rumours of a possible merger with Changan, but the matter has not gone further than talk. The sale of the stake in the JV with Honda was another step towards winding down the internal combustion engine business.
At the same time, co-operation with Honda continues in the "electric" sphere. In autumn 2024, the partners launched an electric car production plant in Wuhan with a capacity of 120,000 cars per year. By 2027, Honda promises to bring ten electric models under its brand to the Chinese market, including the e:N series, as well as the new Ye range, shown in spring. By 2035, Honda expects to fully transition to electric vehicles in China.
