Author/ Author of Caijing Tianxia Weekly Han Ling
Edited / Mao Shiyang
(Photo/Visual China)
After a month, Dongfeng Company officially withdrew from Dongfeng Yueda Kia, and the tripartite joint venture marriage for more than 20 years ended in "breakup".
On the evening of December 20, the official website of the Shanghai United Assets and Equity Exchange announced that the 25% equity transfer project of Dongfeng Yueda Kia has been delisted, and the transfer price is 297 million yuan. The receiver has not yet been announced, and after Dongfeng's exit, the shareholding ratio of Yueda Kia is still under negotiation, and the final result is expected to be announced in April next year.
If everything goes according to plan, Dongfeng Yueda Kia may become the next well-known car company controlled by foreign capital after BMW Brilliance.
As soon as the news came out, public opinion was in an uproar. Although the news that Dongfeng will sell its stake in Dongfeng Yueda Kia was confirmed in mid-November, the equity transfer price is less than 300 million yuan, which is still unexpected.
In the past, a Korean joint venture car company with annual sales of 650,000 units, Dongfeng only sold 297 million yuan
According to tianyancha information, Dongfeng Yueda Kia has a registered capital of 624 million US dollars (about 3.975 billion yuan).
"Finance and Economics" weekly learned that one of the reasons why the "break-up fee" is so cheap is because some of the core assets of Dongfeng Yueda Kia have been sold in advance.
An automotive supply chain source told Caijing Tianxia Weekly that the Chinese Express (Gaohe Automobile) founded by Ding Lei in 2020 acquired the first factory of Dongfeng Yueda Kia, which solved the production path problem in Yancheng, and Dongfeng Yueda Kia also used this to adjust production capacity and save costs.
The plant sold has an annual output of 140,000 vehicles, making it one of the three major plants of Dongfeng Yueda Kia.
According to public information, Dongfeng Yueda Kia was established on September 12, 1992, with a joint venture business period of 30 years until September 11, 2022. Judging from the business period of the joint venture, it is currently less than 1 year since the expiration of the tripartite joint venture.
According to the previously announced tripartite shareholding ratio, Dongfeng Company's equity accounts for 25%, Jiangsu Yueda Investment Co., Ltd. holds 25%, and Kia Co., Ltd., which has a Korean background, accounts for 50%. Some insiders believe that the equity transferred by Dongfeng is very likely to be taken over by Kia, and at that time, kia's equity will exceed 70%. This means that in the future, Kia may fully control the joint venture.
In the middle of this year, there have been media reports that the tripartite negotiations between Dongfeng, Yueda and Kia have been launched. Kia wanted to expand the share ratio, and Dongfeng, a state-owned car company group, felt that it was not profitable and uncontrolled, so the three parties quickly re-evaluated the cooperation and reached an agreement.
In fact, the fundamental reason for Dongfeng's withdrawal is that in this three-party joint venture, Dongfeng not only does not make money, but also drags down the overall revenue because of its continuous decline in sales.
According to the data, in 2020, Dongfeng Yueda Kia's revenue was 21.94 billion yuan and a net loss of 4.75 billion yuan. From January to October this year, Dongfeng Yueda Kia achieved revenue of 12.48 billion yuan and net profit loss of 2.612 billion yuan. In terms of sales, in 2016, Dongfeng Yueda Kia's annual sales were 650,000 vehicles, a record high. In 2014 and 2015, annual sales also exceeded 600,000 vehicles. These three years were the most brilliant time for Dongfeng Yueda Kia in China.
Entering 2017, sales began to decline sharply, with sales of only 359,000 vehicles in that year, rebounding slightly to 370,000 units in 2018, and then declining again in 2019, with cumulative sales of 289,800 vehicles. Affected by the epidemic in 2020, sales volume was 249,000 units, down 11.97% year-on-year. From January to September this year, Dongfeng Yueda Kia sold 112,000 vehicles, down 20.61% year-on-year, and the cumulative sales volume in the first three quarters was less than 120,000 units.
After the decline in sales, the production capacity of some factories of Dongfeng Yueda Kia was idle.
"Dongfeng's withdrawal of shares is a good thing for Dongfeng itself." A number of Dongfeng Yueda Kia internal employees said.
In July last year, Zhu Yanfeng, chairman of Dongfeng Company, publicly stated that Dongfeng was "pulled" into the market by Dongfeng Yueda Kia, in fact, the latter was in order to qualify. At that time, vehicle companies without state-owned asset backgrounds were not allowed.
Therefore, unlike in the joint venture brands such as Dongfeng Nissan, Dongfeng Honda, Dongfeng Peugeot, Dongfeng Citroen, etc., Dongfeng Company has absolute right to speak on personnel appointments and operations, and its joint venture company Dongfeng Yueda Kia has always had a relationship with Dongfeng Company.
Dongfeng is responsible for production, quality and internal process control, real product planning, product development, and procurement system are not involved. In fact, this also reveals that the dismal sales volume of Dongfeng Yueda Kia is related to the local strategic mistakes of Hyundai Group in China.
However, the reason for Dongfeng's withdrawal of shares is also related to the decline in the overall sales volume of Dongfeng Group in recent years. Dongfeng's overall sales volume in 2016 was 4.28 million units, which has dropped to 2.87 million units in 2020, and its cumulative sales from January to November this year were 2.51 million units.
Among them, the annual sales decline of the group's joint ventures is particularly obvious, which can be seen from Dongfeng's active adjustment of strategic relations with several other joint ventures. Dongfeng Renault was dissolved in April last year, and its Wuhan plant has been turned into the headquarters of Lantu Automobile Production. Its first joint venture company, DPCA, is also negotiating equity adjustments, and has a preliminary plan. Some senior figures of Dongfeng Company said that Dongfeng Group and Stellantis Group, a foreign shareholder of Dongfeng DPCA, have set up a working group to negotiate the adjustment of DPCA's equity.
The relevant person in charge of DPCA Responded that the future situation of DPCA is being discussed by both shareholders, and there is no conclusion at present. He said that in order for the two brands of Dongfeng Peugeot and Dongfeng Citroen to better adapt to the development in China, some adjustments and explorations may be made in the field of marketing.
The east wind has receded, "Yueda Kia" is enough?
With the withdrawal of Dongfeng, Yueda Kia began to accelerate its layout in the Chinese market.
"The company will adjust the localization strategy in the Chinese market, and the investment in the Chinese market will not only not decrease, but will further increase." Liu Changsheng, the new general manager of Dongfeng Yueda Kia, stressed.
"Upward" has become the core point of Hyundai's market strategy in China, starting next year, Yueda Kia will gradually stop the production of low-end entry-level models below 100,000 yuan and take the high-end brand route. It is not difficult to see that Hyundai is trying to open up China's high-end market through the "price for volume" approach.
According to Liu Changsheng, the company will take hybrid as a stepping stone to enter the Chinese market, accelerate the research and development of hybrid and pure electricity, and at the end of next year or the beginning of 2023, Yueda Kia will invest a new electric vehicle in the Chinese market every year.
However, with the withdrawal of Dongfeng, can Yueda Kia usher in a new life?
To some extent, behind the disintegration of Dongfeng Yueda Kia's three parties is the "cold" of Hyundai Motor Group's marketing in the Chinese market.
Since 2017, Hyundai's sales in the Chinese market have shown a significant downward trend. Statistics show that in 2017, Hyundai China's annual sales were 785,000 units, down 31.3% year-on-year, 790,000 units in 2018, 716,000 units in 2019, down 5.7% year-on-year, and fell to 502,000 units in 2020. Cumulative sales in the first 11 months of this year were 320,100 units, which is still far from the annual target of 560,000 units.
At the same time, Hyundai Group's frequent personnel movements in China have caused turmoil within the company.
On December 17, Hyundai Motor Group announced that Hyundai Motor Group China Vice President Li Heyuan will succeed Li Guangguo as president of Hyundai Motor Group (China) and be fully responsible for the operation and management of Hyundai Motor Group (China) Investment Co., Ltd. The new appointments will take effect on 1 January 2022. The replacement of the president of China is related to the decline in sales during Lee Kwang-kuo's tenure.
Frequent executive changes have become the routine operation of Hyundai Group, and Dongfeng Yueda Kia has also changed the group's executives many times due to poor sales. From 2015 to the present, Dongfeng Yueda Kia has experienced 6 general managers.
"The strategies of the parties to the joint venture cannot be agreed, and even the internal contradictions are becoming more and more acute." Dongfeng Yueda Kia internal employees said.
In September 2019, Hyundai Kia Motors appointed Li Feng as the general manager of Dongfeng Yueda Kia, and is fully responsible for the production, management and marketing of Dongfeng Yueda Kia. This is also the first Chinese CEO of Dongfeng Yueda Kia. Li Feng's appointment also reflects the Group's recognition of the decline in sales in the Chinese market and the urgent need for a manager with a deep understanding of the Chinese market to save the plight faced by Dongfeng Yueda Kia.
However, a year and a half later, in March this year, Li Feng was suddenly transferred away again, and the new general manager Liu Changsheng took over the baton of Dongfeng Yueda Kia. In the context of the decline in sales of Dongfeng Yueda Kia and the withdrawal of Dongfeng, the possibility of Liu Changsheng leading Yueda Kia back to the peak is minimal.
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.