Photo/Shetuwang

Sept. 5 (NBD) -- Chinese automobile manufacturer Chongqing Changan Automobile Co Ltd (Changan Auto, 000625.SZ) reached an agreement with Japan's Suzuki Motor Corporation on Tuesday to buy 40 percent stake in Chongqing Changan Suzuki Automobile Co Ltd (Changan Suzuki) from Suzuki and another 10 percent from the Chinese unit of Suzuki for a total of 1 yuan (14.6 cents), which indicates Suzuki's exit from Chinese automobile market.

According to the agreement, Changan Suzuki will continue to manufacture and sell models under Suzuki brand and provide after-sales service as well as maintenance service for Suzuki car owners.

Moreover, Changan Suzuki will introduce Suzuki's new models with authorization from the Japanese automaker. 

Upon the completion of the new deal, Changan Suzuki will become a wholly-owned subsidiary of Changan Auto. 

Found in 1993, Changan Suzuki was the first automobile manufacturing joint venture (JV) to be established by a Japanese company in China. The company focused on compact car products and its annual sales volume hit up to 220,000 units in 2010. 

With the consumption upgrade of Chinese automobile market, the carmaker faced decline in sales volume since 2011.

Nikkei revealed that despite attempts to regain momentum, the JV's production fell 35 percent in fiscal 2017 to around 70,000 units. Suzuki's overall production in China was down 70 percent from the peak in fiscal 2010.

The lackluster sales performance led to breakdown of the partnership between the two major shareholders.

In 2016, the Chongqing-headquartered JV decided to close its technology center and the business of the center would be taken over by quality division. NBD learnt from Changan Susuki that the compnay had terminated the scheduled introduction of several models and no new car products are prepared.

The change for divisions was regarded as the curtain-raiser of Suzuki's exit from the JV by employees of Changan Suzuki.

Meanwile, Suzuki reportedly planned to offload its stake in Changan Suzuki, which was claimed to be fake news by the latter.

However, in April this year, Changan Auto was again reported to take charge of the entire JV, though this was also denied by the listed car maker.

It is noted that Changan Suzuki will become a burden for Changan Auto if the auto manufacturing subsidiary can't achieve a successful turnaround.

By the end of April this year, Changan Suzuki's assets totaled 4.53 billion yuan (663.6 million U.S. dollars) and its liabilities amounted to 4.80 billion yuan (703.1 million U.S. dollars), with net assets registering -273.92 million yuan (-40.1 million U.S. dollars).

Email: zhanglingxiao@nbd.com.cn