(Yicai) July 14 -- Shanghai Aerospace Automobile Electromechanical plans to offload its entire 70 percent stake in its troubled South Korean subsidiary, Estra Automotive Systems, as the Chinese automotive thermal system equipment supplier looks to mitigate the impact of shifting market conditions on its business performance.

The sale, which was approved by the company’s Board of Directors on July 10, is intended to reduce HT-SAAE’s exposure to risks tied to its overseas operations, optimize resource allocation and recover invested capital, the Shanghai-based company said on July 11.

This is not the first time HT-SAAE has sold off struggling assets to reduce risk. Last year, it offloaded its loss-making Luxembourg-based subsidiary of Estra. However, this latest sale is still at a very early stage. There is no confirmed buyer, the asset valuation process has not started and therefore the price of the transaction cannot yet be determined.

HT-SAAE blamed the planned sale on broader changes in the global automotive industry that have led to shrinking market share for Estra’s key customers, which include BMW, General Motors, Stellantics and BYD. This has caused a steady decline in new orders, low capacity utilization and significant cash flow pressure.

HT-SAAE first acquired a 51 percent stake in the company in 2018, when it was known as Erae Automotive Systems, and hiked its stake to 70 percent in 2019, rebranding the firm as Estra Automotive Systems. The unit operates 12 factories and two R&D centers located in China, South Korea, Southeast Asia and the Americas.

Estra, which is one of the world’s leading suppliers of automotive thermal systems, posted revenue of CNY2 billion (USD277 million) in 2024, according to HT-SAAE. This accounted for about 27 percent of HT-SAAE’s revenue last year, based on its shareholding ratio. However, Estra recorded losses in 2022 and 2023 and is only just breaking even now.

Automotive thermal management remains a key source of revenue for HT-SAAE. Last year, this segment generated CNY3.4 billion (USD474.2 million), accounting for roughly 66 percent of the company’s total annual revenue, according to the firm’s 2024 annual report.

HT-SAAE’s share price [SHA:600151] closed up 1.6 percent at CNY7.45 (USD1) today. Earlier in the day it surged 5.4 percent to hit CNY7.73.

Editor: Kim Taylor