(Bloomberg) -- Nippon Steel Corp. will exit a joint venture in China as its top customers — Japanese automakers — struggle to maintain market share in Asia’s biggest economy.
Baoshan Iron & Steel Co. agreed to buy Nippon Steel’s 50% stake in Baosteel-Nippon Steel Automotive Steel Sheets for 1.8 billion yuan ($247 million), it said in a statement on Tuesday. That will make the factory, founded in 2004, a wholly-owned subsidiary of the world’s largest steelmaker.
Stiff competition from Chinese automakers is forcing Japanese firms — among the biggest buyers of steel sheets — to cut production and staffing or, in the case of Mitsubishi Motors Corp., pull out altogether. That’s translating to a drop in Japanese investment into China, with first-quarter volumes falling to the lowest since at least 2014.
Japanese brands accounted for 15% of the Chinese car sales market in the first quarter, down from 21% five years ago. Chinese manufacturers now have 53%, up from just 37% over the same period, led by electric vehicle maker
Honda Motor Co. will cut its production capacity of gasoline-powered cars in China by 19%, it said Thursday. The company will close one production line and idle another one from October, it said in a statement.
Nippon Steel helped kick-start China’s steel industry, now the largest in the world, in the late-1970s by providing technology and expertise to Baosteel. The move to reduce its exposure to China is a symbolic shift, and comes as the biggest Japanese steelmaker is looking to expand in India and the US.
It has been struggling to complete a proposed purchase of United States Steel Corp. due to heightened scrutiny of foreign investors in an election year, and has now positioned the deal as a potential counterweight to China, which currently dominates the global market.
The decision to exit from the Baosteel venture “makes sense given US-China trade tensions,” Nomura Securities Co. analysts including Yuji Matsumoto said in a note.
--With assistance from Shoko Oda and Alfred Cang.
(Updates with report on Honda cutting capacity in 5th paragraph and chart.)
©2024 Bloomberg L.P.