More Chinese JVs, Suffering from Market Shocks, Withdraw

SHANGHAI – From the mid-1980s to the early 2010s, a large number of joint ventures were formed between global automakers and their Chinese counterparts to build passenger vehicles.

The allure of exhilarating sales and profits in the world’s largest light-duty vehicle market was too good to be ignored.

The times have changed. With the Chinese market having contracted for the past three consecutive years after uninterrupted growth of more than three decades, an increasing number of partnerships are being abandoned.

Groupe Renault was last year the only foreign car manufacturer to streamline partnerships with local partners – it closed a gasoline-powered car business with Dongfeng Motor Group while continuing to build vans with Brilliance China Automotive and electric vehicles with Jiangling Group Electric Vehicle Co.

This year, two of Japan’s smaller automakers ended one of their two joint ventures.

In April, Mitsubishi left Southeast Motor Corp. while maintaining a joint venture with GAC Motor Co. Southeast Motor, established in 1995, was previously a three-party partnership between Mitsubishi, Fujian Motor Industry Group Co. and China Motor Corp of Taiwan.

Four months later, in August, Mazda closed a joint venture incorporated with China FAW Group Corp. in 2005. In the future, the Japanese brand will only produce cars with Changan Automobile Co.

Kia Motors is the latest foreign automaker to consolidate operations with a local partner, according to Chinese media.

Dongfeng Yueda Kia was established in Yancheng city, east China, in 2002 as part of a 50-25-25 partnership between Kia, Dongfeng and Yueda Investment Co. – a local investment company state owned. It is Kia’s only joint venture in China.

Kia, Dongfeng and Yueda Investment have signed a memorandum of understanding that will allow Dongfeng to transfer its entire 25% stake in the joint venture to Kia, the Shanghai-based news site China Business News reported this month. and Guancha, based in Beijing.

Mitsubishi and Mazda lack sufficient model lines to support two joint ventures.

Mitsubishi builds three products in China: the Outlander, ASX and Eclipse crossovers. Mazda’s locally assembled product line consists of six models: the Mazda3 Axela and Mazda6 Atenza sedans, and the CX-30, CX-4, CX-5 and CX-8 crossovers.

Kia has more locally made products for sale in China. Dongfeng Yueda Kia produces ten models ranging from sedans, crossovers to multi-purpose vehicles.

However, due to low brand recognition, Kia has lost much of its market share in recent years to other global brands and major Chinese light vehicle manufacturers such as Geely Automobile Holdings and Great Wall Motor. Co.

Dongfeng Yueda Kia can build up to 750,000 vehicles per year at full capacity. But annual deliveries fell to 250,000 in 2020 after hitting a record 650,000 in 2016.

In the first three quarters, the joint venture’s sales fell 18% from a year earlier to less than 120,000.

Dongfeng is getting rid of its stake in Dongfeng Yueda Kia to end the joint venture’s snowball loss exposure, China Business News and Guancha reported, citing sources close to the state-owned automaker.

More and more global automakers need to streamline local partnerships created at a time when growth seemed guaranteed.

One of them is Stellantis, born from the recent merger of PSA Peugeot Citroën and Fiat Chrysler.

PSA formed a joint venture with Dongfeng in 1992 to assemble cars for the Peugeot and Citroen brands, while Fiat Chrysler partnered with GAC Motor Co. in 2010 to build Jeep models.

With an annual production capacity of over one million vehicles, Dongfeng-PSA only sold about 62,000 vehicles in the first three quarters of the year.

During the same period, GAC-Fiat Chrysler, which can build 328,000 vehicles at full capacity, has seen deliveries fall to less than 15,000.

The dismal sales suggest that Stellantis must integrate the two partnerships to stem the losses in China.

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