What we’re seeing with Dongfeng’s decision to sell its 50% stake in its Honda engine joint venture is not just a business transaction — it’s a symptom of a larger systemic shift. For decades, foreign automakers like Honda, Toyota, and Nissan profited from the Chinese market by selling gasoline-powered cars, but the rise of Chinese EV champions such as BYD has fundamentally changed the rules of the game.

The venture, founded in 1998 to produce internal combustion engines, is now a liability. It lost money last year, carries heavy debts, and employs hundreds of workers whose livelihoods are on the line.

The fact that this engine plant is being wound down at the very moment that Honda is scrambling to open an EV line in Guangzhou tells you everything: capital is abandoning old industries and rushing into new ones.

Meanwhile, Dongfeng itself has seen sales collapse from 3.8 million cars in 2016 to just 1.5 million last year — showing how even state-owned companies are not immune to the ruthless pressures in internal and external competition.