Dongfeng Abruptly Ends Long-Standing Honda Engine Partnership | Carscoops

      A longstanding automotive partnership is experiencing tension as one party exits in light of China's swift shift to electric vehicles (EVs) and the decline of the internal combustion engine (ICE) market.

      Dongfeng is divesting its 50 percent stake in an enduring engine joint venture with Honda, which has been operational since 1998 and has focused on the production of combustion engines. The joint venture operates a factory that employs 827 individuals and carries a debt of 3.3 billion yuan.

      Since the late 1990s, Honda has collaborated with Dongfeng in China, manufacturing hundreds of thousands of internal combustion engines through this partnership. However, this collaboration may soon change as Dongfeng has chosen to sell its stake, signaling a significant decrease in traditional engine sales in China and an increasing movement towards electric vehicles.

      Dongfeng recently listed its stake on the Guangdong United Assets and Equity Exchange. Although no reserve price has been established, the listing has a deadline of September 12.

      The filing reveals that last year, the joint venture had assets valued at 5.4 billion yuan ($752 million) and debts of 3.3 billion yuan ($459 million). The associated factory employs 827 workers.

      Challenges for Legacy Partnerships

      Japanese automakers like Honda are feeling pressure from domestic Chinese brands, many of which are advancing rapidly in producing innovative and competitive EVs. Dongfeng is also facing similar difficulties, trailing behind competitors like BYD.

      The company's annual sales illustrate the trend, plummeting from 3.8 million vehicles in 2016 to just 1.5 million last year across its own brand and joint ventures with Honda and Nissan.

      It remains uncertain what the future holds for Dongfeng Honda. Honda may consider buying out Dongfeng to take its Chinese engine operation fully in-house or may seek another local brand to form a new joint venture. Currently, the automobile production partnership between Honda and Dongfeng is still in effect.

      Earlier this year, Honda launched a new EV specifically targeted at the Chinese market in collaboration with Dongfeng. Simultaneously, it introduced the GAC Honda GT through its other joint venture with GAC Group, indicating that while the traditional engine-focused model may be diminishing, the era of electric vehicles is clearly influencing the company's future in China.