The rapid transition to electric mobility in China is having a serious impact on the internal combustion engine business. State-owned Chinese automaker Dongfeng announced that it is selling its 50 percent stake in the Dongfeng Honda Engine joint venture, which produces engines for Honda's Chinese models. The move is a clear signal of the changing market landscape.
The sale of the stake was announced on the Guangdong United Assets and Equity Exchange, with bidding open until September 12. No minimum price has yet been announced, but the prospective investor will have to take into account a number of challenges. Dongfeng Honda Engine, which has been producing engines since 1998, is loss-making and burdened with significant debts of 3.3 billion yuan (about 392 million euros). In addition, sales are declining, with Honda cutting its factory's production capacity by 50% at the beginning of the year.
Reasons for the retreat and future plans
Japanese manufacturers such as Honda underestimated the speed of the transition to electric vehicles in China and lost market share. Local giants such as BYD, Leapmotor and Li Auto are reporting huge sales growth, while brands such as Xpeng and Nio are also increasingly establishing themselves. This is directly affecting traditional manufacturers - for example, sales of Dongfeng, which also partners with Nissan, fell from 3.8 million vehicles in 2016 to just 1.5 million last year.
Despite the withdrawal from the engine joint venture, cooperation between Dongfeng and Honda continues in another direction. In October 2024, the two partners opened a new energy vehicle plant in Wuhan with an annual capacity of 120,000 vehicles. Honda plans to launch a total of ten electric models in China by 2027, including models from the e:N and Ye series. With these moves, Honda aims to become an all-electric brand in China by 2035, indicating that it sees its future in electric vehicles, not internal combustion engines. Dongfeng's withdrawal from the joint venture is a logical step in this new strategic plan.