SHANGHAI – From the mid-1980s to the early 2010s, a large number of joint ventures were formed between global automakers and their Chinese peers to build passenger vehicles.
The lure of heady sales and profits in the world’s biggest light-vehicle market was too good to ignore.
Times have changed. With the Chinese market contracting the past three straight years after non-stop growth for more than three decades, an increasing number of the partnerships are being scrapped.
Renault Group last year was the only foreign auto manufacturer to streamline partnerships with local partners -- it closed a gasoline-powered car venture with Dongfeng Motor Group while continuing to build vans with Brilliance China Automotive and electric vehicles with Jiangling Group Electric Vehicle Co.
Two of Japan’s smaller automakers this year have terminated one of their two joint ventures.
In April, Mitsubishi exited Southeast Motor Corp. while retaining a joint venture with GAC Motor Co. Southeast Motor, established in 1995, was previously a three-way partnership between Mitsubishi, Fujian Motor Industry Group Co. and Taiwan’s China Motor Corp.
Kia Motors is the latest foreign auto manufacturer consolidating operations with a local partner, according to Chinese media reports.
Dongfeng Yueda Kia was created in the east China city of Yancheng in 2002 as a 50-25-25 partnership between Kia, Dongfeng and Yueda Investment Co. – a local state-owned investment company. It is Kia’s sole joint venture in China.
Kia, Dongfeng and Yueda Investment have signed a memorandum of understanding that will permit Dongfeng to transfer all of its 25 percent interest in the joint venture to Kia, the Shanghai-based China Business News and Beijing-based news website Guancha reported this month.
Mitsubishi and Mazda lack sufficient model lineups to support two joint ventures.
Mitsubishi builds three products in China – the Outlander, ASX and Eclipse crossovers. Mazda’s locally assembled product lineup 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 built products to sell in China. Dongfeng Yueda Kia produces ten models ranging from sedans, crossovers to multipurpose vehicles.
However, because of weak brand recognition, Kia has lost a big chunk of market share in recent years to other global marques and major Chinese light-vehicle makers such as Geely Automobile Holdings and Great Wall Motor Co.
Dongfeng Yueda Kia can build up to 750,000 vehicles annually at full capacity. But annual deliveries shrank to 250,000 in 2020 after reaching a record high of 650,000 in 2016.
In the first three quarters, the joint venture’s sales slipped 18 percent from a year earlier to less than 120,000.
Dongfeng is offloading its interest in Dongfeng Yueda Kia to end exposure to snowballing losses at the joint venture, China Business News and Guancha reported, citing sources close to the state-owned automaker.
More global automakers must streamline local partnerships created during a time when growth seemed guaranteed.
One of them is Stellantis, created when PSA Peugeot Citroen and Fiat Chrysler recently merged.
PSA incorporated a joint venture with Dongfeng in 1992 to assemble cars for the Peugeot and Citroen brands, while Fiat Chrysler established a partnership with GAC Motor Co. in 2010 to build Jeep models.
With annual production capacity of more than 1 million vehicles, Dongfeng-PSA only sold around 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, saw deliveries thin to below 15,000.
The dismal sales suggest Stellantis must integrate the two partnerships to stem losses in China.