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Venture borrows sales network to sell SUVs
By Gong Zhengzheng (China Daily)
Updated: 2004-04-26 09:28
Japanese Honda Motor Co's joint venture (JV) in Central China's Hubei
Province will use the networks of another JV in the nation's south to sell its
newly launched CR-V sport utility vehicles (SUVs).
The JV with Dongfeng Motor Corp in Wuhan, Hubei's capital, has clinched a
one-year deal with Guangzhou Automobile's venture in Guangdong to use 40 dealers
belonging to the latter, according to JV and Honda officials.
The JV in Wuhan, Dongfeng Honda (Wuhan) Automobile Co Ltd, is also building
its own sales networks for the CR-V, which was launched on Saturday, officials
said. It will also have 40 of its own dealers by the end of the year.
The latest move is seen as a temporary compromise on a sales network dispute
between Dongfeng, Honda and Guangzhou Automobile.
Dongfeng and Honda hoped to create a three-party car sales JV with Guangzhou
Automobile based on the existing sales networks of the Japanese automaker's JV
in Guangzhou to sell locally made Hondas.
Honda would have controlled a 34 per cent stake, with Dongfeng and Guangzhou
Automobile getting 33 per cent each, according to details Dongfeng President
Miao Wei revealed to China Daily in November.
But the plan was derailed mainly because of resistance from the Guangzhou
automaker.
Dongfeng Honda (Wuhan) delayed the launch of the CR-V for two months as a
result of the sales network dispute.
"We now have no plans to combine the two JVs' sales channels. We will discuss
the issue in the future according to the related State regulations," said Liu
Yuhe, executive vice-president of Dongfeng Honda (Wuhan).
The Honda-Guangzhou JV, which produces the Accord mid-sized sedan, Fit
compact sedan and Odyssey commercial wagon, has built more than 200 sales stores
across China.
"It is not economical for Honda and Dongfeng to build new sales networks for
a single model (the CR-V). The best way is to unite the two JVs' channels to cut
costs," said Jia Xinguang, an analyst with the China National Automotive
Industry Consulting and Development Corp.
"The sales network combination will be a matter of time, and it will depend
on bargaining between Dongfeng and Guangzhou Automobile, who have already formed
links."
Dongfeng, Guangzhou Automobile and Honda have an export-oriented small-sized
car JV in Guangzhou, which will start production next year.
Dongfeng and Honda also have a factory in Guangzhou that produces engines for
the JV between Guangzhou Automobile and the Japanese firm.
Dongfeng Honda (Wuhan), which has an annual production capacity of 30,000
units, plans to make 20,000 CR-Vs this year.
The 2.0-litre CR-V, to retail at 239,800 yuan (US$28,900), will go
head-to-head with Mitsubishi's Pajero Outlander and Nissan's Paladin in China's
surging SUV market.
More than 10,000 imported CR-Vs have been sold in China over the past two
years.
The JV will increase its capacity to 120,000 vehicles annually with the
introduction of more Hondas.
Honda will possibly introduce the Civic sedan into the JV in
2006.
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