Guan Cha Zhe Wang·2025-08-19 07:32Core Viewpoint - Dongfeng Motor Group is planning to sell its 50% stake in Dongfeng Honda Engine Co., Ltd. as part of its strategy to accelerate the transition to new energy vehicles, despite the company still generating a net profit of 371 million yuan in the first half of the year [1]. Group 1: Company Performance and Strategy - Dongfeng Honda Engine Co., Ltd. was established in 1998 as a joint venture between Dongfeng Motor and Honda, witnessing the golden era of automotive joint ventures in China [1]. - Dongfeng Honda's executive vice president, Pan Jianxin, emphasized the urgency of the situation, stating that the company is at a critical juncture and must adopt a performance-based compensation model [3]. - Honda's sales in China have significantly declined, with cumulative sales from January to July 2023 falling to less than 360,000 units, a 23% decrease year-on-year [6]. Group 2: Market Challenges - Honda's traditional strengths in fuel-efficient vehicles are being challenged by domestic brands offering more advanced and cost-effective electric vehicles [9]. - The company is facing a prolonged sales downturn, with July 2023 marking the seventh consecutive month of declining sales, the longest downturn in its history in China [6]. - Inventory levels for Dongfeng Honda and GAC Honda dealers are around 2.0, significantly higher than the industry average of 1.35, indicating potential overstock issues [8]. Group 3: Transition to New Energy Vehicles - Honda plans to reduce its fuel vehicle production capacity by half and aims for 80% of new models launched in China by 2025 to be electric vehicles, up from 70% [12]. - Despite efforts to transition, Honda's electric vehicle sales in the first half of 2023 were less than 45,000 units, accounting for only 14% of total sales, which is below the industry average of 33.3% [14]. - The company is also facing increased competition from other Japanese automakers like Toyota and Nissan, which have successfully launched popular electric models in the Chinese market [16]. Group 4: Financial Performance - Honda's financial situation is deteriorating, with a reported net profit of 196.67 billion yen (approximately 9.57 billion yuan) for the first quarter of the 2025 fiscal year, a 50.2% year-on-year decline [19]. - The company has adjusted its operating profit forecast for the 2026 fiscal year to 700 billion yen (approximately 34.1 billion yuan), which is still below market expectations [19]. - The ongoing challenges in both the Chinese and American markets are putting significant pressure on Honda's overall financial health, with the company needing to innovate to avoid further decline [20].