Kia and Yueda will form a “new company” with a capital increase of $900 million. Do you think so?
On the first day of the New Year, Kia did a great thing!Today, South Korea kia corporation and yancheng people’s government, Jiangsu Yueda Group signed an agreement to expand investment.It is reported that Kia and Yueda are planning to form a new joint venture, which means dongfeng Motor will officially withdraw from Dongfeng Yueda and Kia. The 29-year cooperation between the three parties has come to an end, and the new era of joint venture will be jointly opened by Kia and Yueda.Since it is the new era of joint venture, what will be the focus of bilateral cooperation?From the perspective of the capital increase agreement, there are three points of interest released: First: the new joint venture plans to raise $900 million in capital, the new company name will be released in April 2022.At present, its official website and social platforms are still using dongfeng Yueda Kia’s “old name”.Industry speculation, the new company or renamed “Yueda Kia” or “Kia China”, car rating agency to see the latter is more likely.Second: In terms of vehicle models, Kia will focus on promoting the introduction of global strategic models and new energy vehicles.The new models to be launched in 2022 will be equipped with a large number of safety configurations and new technology configurations to further improve product performance and market competitiveness, and improve kia’s global strategic model lineup together with jia Hua, Smarrun Ace and other models on sale.In addition, starting from 2023 to 2027, Kia will launch new electric models in the Chinese market every year, gradually building a new EV matrix of six electric vehicles.In the next 10 years, Kia has set the goal of producing and selling more than 4 million units in China.Third, in terms of operation, the joint venture company will build a new organizational structure, establish an innovative organizational culture, actively introduce local talents and professionals, and accelerate the localization work.In addition, the new joint venture will achieve win-win cooperation with Chinese dealer partners by setting reasonable operating indicators, continuously optimizing business policies and rewarding excellent dealers.Based on the above information, dongfeng will create favorable conditions for kia motors’ development in China, which may be a good opportunity to take off.As we know, dongfeng Yueda Kia has had its moments as a three-way joint venture.During the boom years of the domestic car market, The sales volume of Dongfeng Yueda kia increased by relying on “domestic price and joint venture quality”. The sales volume reached 650,000 units in 2016, which also became the peak of Dongfeng Yueda Kia.Perhaps it is the change in sales volume and the changing environment that is also causing friction among shareholders.Since 2017, Sales of Dongfeng Yueda kia have plummeted and performance losses have intensified;By 2020, Dongfeng Yueda kia will have a revenue of 21.94 billion yuan and a net loss of 4.75 billion yuan;The net loss in the first three quarters of 2021 was about 2.6 billion yuan.From the performance of recent years, the three parties have long been mutually compatible, let Dongfeng car have the idea of withdrawing.As far as Dongfeng is concerned, its share in Dongfeng Yueda kia is only 25%, and its voice is far lower than that of joint ventures such as Dongfeng Honda and Dongfeng Nissan, and its profit sharing is not much. However, Dongfeng yueda Kia is mainly responsible for production and quality control, which makes its position slightly awkward.Moreover is the performance of successive losses, rather than dongfeng is out, but also to get rid of a “bad assets” burden.Therefore, at the end of last year, news about Dongfeng’s “withdrawal” emerged. According to media reports: On November 19, 2021, Dongfeng Motor Group Co., Ltd. publicly listed 25% of its shares in Dongfeng Yueda Kia Automobile Co., Ltd. on Shanghai United Equity Exchange at a listing price of 297 million yuan.On December 18, 2021, the official website of Shanghai United Equity Exchange shows that the 25% equity transfer project of Dongfeng Yueda Kia has been delisted and the transfer price is 297 million yuan.On January 12, 2022, Dongfeng Motor Group Co., Ltd. completed the transaction of its 25% equity of Dongfeng Yueda Kia Automobile Co., LTD. Jiangsu Yueda Automobile Group Co., LTD. (hereinafter referred to as “Yueda Automobile Group”) as the sole bidder.According to the data, Dongfeng Yueda Kia Automobile Co., Ltd. was established on September 12, 1992 by Kia Corporation, Dongfeng Motor Group Co., Ltd. and Jiangsu Yueda Investment Co., LTD., with 50%, 25% and 25% equity respectively.After the completion of equity transfer, Dongfeng Yueda Kia Motors Co., Ltd. will be changed to kia Corporation, Yueda Motor Group and Jiangsu Yueda Investment Co., LTD., holding 50%, 25% and 25% respectively.Yueda Auto Group was established on June 18, 2021, with controlling shareholder Yueda Group holding 70 percent and Yancheng State Assets Investment Group Holding 30 percent, according to the documents.From listing to transaction, it only took less than three months to end more than 20 years of tripartite cooperation.In fact, dongfeng’s “withdrawal” is a good thing for all parties.First, combined with the previous national policy of “adjusting the shareholding limit of joint-venture car enterprises and canceling the foreign-owned shareholding limit of passenger cars in 2022”, it is widely believed in the market that Dongfeng exits at this juncture, which is a “stop loss”.Previously, Renault withdrew from Dongfeng Renault, Dongfeng withdrew from Dongfeng Yueda kia, behind which dongfeng Group accelerated the layout of its own brands.Last year, Dongfeng Motor released the “14th Five-year Plan”, the overall scale of independent passenger vehicles will exceed 1 million, the group will make efforts to independent brands.For Dongfeng Motor, leaving Dongfeng Yueda Kia may allow it to invest more resources and energy into products with more development potential and better benefits, so as to achieve a longer-term goal.Second, For Kia, it can acquire more controlling equity and make all decisions in its own hands.According to media reports, Kia will accelerate the introduction of more competitive global models and gradually stop production of models under 100,000 yuan in order to improve its brand image.It is understood that Dongfeng Yueda Kia currently in the sale of 100,000 yuan of the following models including Yi Run, Huan Chi, Furuidi three models.According to public data, in 2021, the total sales volume of Kia Sports car was 19,881 units, and the monthly average sales volume basically stabilized at about 1,600 units.Furidi sold 15,574 units, with monthly sales reaching 2,800 units at peak.Hwan has only 5,602 units.Kia confirmed the news.Yoo Chang-seung, president of Dongfeng Yueda Kia, said, “We will no longer compete with consumers through low prices. We will win consumers’ recognition through competitive products.In the future, models priced below 100,000 yuan will stop production as soon as possible and seek high-quality development.””Kia will accelerate the introduction of its Global Kia image in The Chinese market and make more efficient decision-making processes through organizational restructuring,” a Kia source said.In the future, Kia will continue to explore the most suitable management system for the Chinese market.”Kia is facing a golden opportunity.And how to win this turnaround?Give all to time.All we can do is wait and see.