GAC Honda to buy out other Honda China stakeholders

Joint venture GAC Honda Automobile is moving to take over Honda Automobile (China), enhancing its productivity with the additional capacity of the Japanese brand's currently plant in Guangzhou, Guangdong province.

GAC Group has approved a deal to transfer its 25 percent stake in Honda China to GAC Honda. The group's stake is valued at 232 million yuan ($35.7 million).

Dongfeng Motor Group, another of the four shareholders in Honda China, put its 10 percent equity in the company on the market on Jan 2, with a listed price of 94.9 million yuan. These developments follow GAC Honda's launch of a 1.2 billion yuan buyout plan in December.

"GAC Honda will purchase a 100 percent stake in Honda Automobile China from the public market and via equity transfer agreements, and will rebuild and upgrade the automobile manufacturer through self-financing," GAC Honda announced in a filing to the Shanghai Stock Exchange on Dec 15.

Honda Automobile China was founded in 2003 by Honda Motor Co, Honda Motor (China) Investment Co, and Chinese automakers GAC Group and Dongfeng Motor Group. The company produces mainly small and mid-size models for the European, North American, African and Middle Eastern markets.

A further 55 percent of the company's equity is held by Honda Motor and the final 10 percent by Honda Motor China Investment, all of which will also be transferred to GAC Honda in the future, according to the Shanghai United Assets and Equity Exchange.

Guangzhou-based GAC Honda's annual production capacity is heading towards 720,000 vehicles with the completion of its third plant's expansion project next year. But, taking over Honda China would help boost its still insufficient production capacity, according to Cui Dongshu, secretary-general of the China Passenger Car Association.

The automaker's production capacity hit about 600,000 vehicles annually at the end of 2017, with production spread across its three plants in Guangzhou. Work is ongoing on the second phase of its third plant, which will add another 120,000 vehicles of annual capacity. The plant is expected to be operational in May 2019.

Honda China's plant is also located in Guangzhou, with an annual capacity of 60,000 vehicles.

Local media reports cited anonymous sources that GAC Honda's move to consolidate these assets was in reaction to rival joint venture Dongfeng Honda Automobile's progressive steps. Both GAC Honda and Dongfeng Honda are set to achieve sales volumes exceeding 700,000 vehicles this year, according to Honda Motor China Investment's announcement. However, Dongfeng Honda is operating with an annual production capacity of about 512,000 vehicles, thanks to a three-shift scheme based on the support of workers transferred from Dongfeng Peugeot-Citroen Automobile.