Honda breaks up with Dongfeng after more than 2 years of negotiations
Honda is restructuring its engine manufacturing business in China due to declining demand for gasoline engines and the approaching expiration of key joint venture contracts, Nikkei reports.
After more than two years of negotiations, Dongfeng Motor Group has agreed to sell its 50 percent stake in Dongfeng Honda Engine, which GAC Honda will acquire and then turn into a wholly owned subsidiary by the end of the year. This move ended the long-running conflict between Dongfeng Honda Engine and GAC Honda regarding pricing and profit sharing, and allowed Honda to consolidate engine production, increase transparency and optimize costs ahead of important strategic decisions to be made in 2028, when the GAC Honda joint venture for the production of finished vehicles will come to an end. the end.
Honda's joint venture with Dongfeng engine manufacturing has suffered losses, recording a net loss of 227 million yuan in 2024 as the Chinese market rapidly transitions to electric vehicles and hybrid vehicles. Honda pushed Dongfeng to exit the joint venture starting in 2023, and deteriorating market conditions eventually led to the deal. The restructuring is aimed at strengthening Honda's position before reviewing its broader partnerships in China. However, uncertainty remains: Honda's sales in China fell by 20% in the first ten months of 2025 to 520,000 units, well below the peak of more than 1.5 million units per year in 2019-2021, so the company's strategy for the period after 2028 remains uncertain.