Beijing (ZXZC)- Dongfeng Motor Corporation, one of Chinese state-owned automobile manufacturers, plans to sell its 25% stake in Dongfeng Yueda Kia, its joint venture with South Korea’s Kia Motors and China’s Yueda Group, local media YICAI reported, citing sources from the Chinese auto group.

Kia Carnival; photo credit: Dongfeng Yueda Kia

The sources revealed that the talks started in the middle of this year. Three parent companies want to revalue the cooperation. Kia wants to raise its stake in the joint venture while Dongfeng thinks the venture generates little profit, so they reached agreement soon. Three parties have signed memorandum in Wuhan in August, the sources added.

The sources said that since the joint venture has three parent companies, its management is not so efficient, which becomes much more obvious when the market performance is weak. The management problem posts a great challenge for its operation.

Dongfeng Yueda Kia was established in 2002. Dongfeng, Yueda and KIA have a respective stake of 25%, 25% and 50%. That means if the deal completes, Dongfeng will have no stake in the venture in the future. 

In 2020, Dongfeng Yueda KIA sold 249,000 vehicles, only 40% of its peak sales, 650,000 units in 2016. In the first nine months, the venture’s sales fell 17.63% from a year ago. According to the 2020 financial results of Yueda, Dongfeng Yueda Kia’s net loss attributable to its listed company was RMB1.188 billion.