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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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