Dongfeng Motor Group, a major state-owned Chinese automaker, plans to sell its 25 percent interest in an unprofitable partnership with Kia Motors via the Shanghai United Asset and Equity Exchange.
Dongfeng has priced the 25 percent stake in the partnership, Dongfeng Yueda Kia, at 297 million ($46.5 million), according to information disclosed last week by the exchange, which helps corporate customers in China sell assets or equity stakes.
The move is widely believed to pave the way for Kia to increase its stake in the joint venture, Dongfeng Yueda Kia, to 75 percent from 50 percent.
Dongfeng Yueda Kia is a 25-50-25 partnership between Dongfeng, Kia and Yueda Investment Co. — an investment company in the east China city of Yancheng.
Kia, Dongfeng and Yueda Investment signed a memorandum of understanding in August to allow Dongfeng to transfer its 25 percent interest in the joint venture to Kia, Shanghai-based newspaper China Business News and Beijing-based news website Guancha reported this month.
The joint venture incurred a net loss of 12.48 billion yuan in the first ten months of the year after losing 4.75 billion yuan in 2020, according to information the exchange has posted on its website.
The partnership’s shrinking sales continue to produce loss after loss for the company.
Dongfeng Yueda Kia was established in 1992 in Yancheng to produce and market passenger vehicles for Kia.
After hitting a record high of some 650,000 vehicles, annual sales at the joint venture have been stuck in a downward spiral amid intensifying competition in China.
In 2020, the company’s deliveries fell short of 250,000 vehicles.
In the first three quarters of the year, sales slipped 18 percent to below 120,000, according to the China Passenger Car Association.