Chinese vehicle maker Dongfeng Motor Corporation said on Tuesday it had agreed to set up a joint venture with Japan’s Honda Motor to tap a small but growing market for sport utility vehicles (SUVs), Reuters reported.
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The proposed company, a 50-50 venture to be based in the central city of Wuhan, would produce 5,000 CR-Vs this year, an executive with the Chinese firm told the news agency.
“It’s all been decided,” the Dongfeng executive told Reuters, declining to reveal investment or targeted capacity. He added that a formal agreement had not been signed.
According to Reuters, Honda, among the foreign firms scrambling to snatch a piece of the world’s fastest-growing car market, has been one of the most successful and profitable, having entered at a relatively low cost. Its only problem so far has been keeping up with heavy demand for its cars with the limited capacity it has.
Reuters said that, by next year, its main car-making venture, Guangzhou Honda, will double [Accord sedan] production capacity to 240,000 units.
A Honda spokesman in Tokyo told Reuters the car maker could not confirm the agreement with Dongfeng.
“Our relationship with Dongfeng spans about 10 years, and we are always discussing the possibility of further business alliances with them,” he reportedly said. “But we haven’t reached a stage where we can confirm anything.”
Reuters noted that the two companies first combined to make automotive parts and Dongfeng now builds engines for Honda’s hot-selling Accord. Dongfeng, China’s third-largest vehicle maker, also has a 10% stake in Honda’s second Chinese joint venture in Guangzhou dedicated to exports, the report added.
According to Reuters, Dongfeng last month set up a $2 billion venture with Japan’s third-biggest car maker, Nissan Motor, to make just over 500,000 cars and commercial vehicles a year by 2006. It also has a joint venture with France’s PSA Peugeot Citroen, the news agency added.
