Understanding honda, GAC extend GAC Honda joint venture to 2038 as sales slump

• The two parties extended the term of their GAC Honda joint venture through 2038 while keeping their ownership structure unchanged.
• GAC Honda has come under mounting sales pressure, with first-half sales falling 55.82% year-on-year.

Honda and GAC Group (HKEX: 2238) have signed an agreement to renew their GAC Honda joint venture, extending the partnership through 2038 while keeping their ownership stakes unchanged.

Honda China announced the renewal in a statement on Monday, as competition in China’s auto market intensifies and joint-venture brands continue to lose market share.

Founded in July 1998, GAC Honda was Honda’s first joint venture in China responsible for vehicle production and sales. GAC and Honda each hold a 50% stake.

The joint venture has sold more than 11 million vehicles cumulatively to date.

With the partners’ initial 30-year cooperation period approaching its expiration, there had been speculation that renewal talks had reached an impasse because GAC was seeking greater control.

China is now the world’s largest auto market, and competition is becoming increasingly intense as electrification and intelligent-vehicle technologies develop rapidly, Honda China said.

Against this backdrop, Honda and GAC will leverage their respective technological and resource advantages to help GAC Honda rebuild its core competitiveness and accelerate its transition toward new energy vehicles (NEVs), it said.

Notably, the joint venture’s sales have declined significantly in recent years.

GAC Honda sold 14,099 vehicles in June, down 53.03% year-on-year. Its first-half sales fell 55.82% to 68,318 vehicles, according to data released by Honda China.

The decline in production was even steeper. GAC Honda produced 5,201 vehicles in June, down 83.22% year-on-year, while first-half output fell 49.85% to 82,884 vehicles.

By comparison, GAC Group sold 144,866 vehicles in June, down 3.47% year-on-year. Its first-half sales rose 2.35% to 773,085 vehicles.

GAC Honda plans to launch 3 new models in 2027 spanning gasoline-powered, hybrid and NEV segments, according to previously announced plans.

The models will include a new-generation Accord, a new product featuring Honda's fifth-generation i-MMD hybrid technology, and a in-house developed model based on a China-focused NEV platform.

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