- Dongfeng and Changan announced plans to reorganize almost simultaneously, suggesting they could merge to become one of the world's largest auto groups.
- Dongfeng appears set to dominate that new auto group, according to local media.
China's state-owned auto giants Dongfeng Motor (HKG: 0489), and Changan Automobile (SHE: 000625) have announced plans to reorganize, hinting they could merge to become one of the world's largest auto groups.
The two car companies announced almost simultaneously last night that their respective indirect controlling shareholders are planning reorganizations with other state-owned central conglomerates.
The reorganizations may lead to changes in their indirect controlling shareholders, but will not lead to changes in actual controllers, both companies' announcements read.
Neither Dongfeng's nor Changan's brief announcements mentioned the other, but sparked speculation about their merger.
In a report today, local media outlet 36kr said the two car companies will merge and form a new automotive group.
Dongfeng looks set to dominate the new auto group. The chairman of the new group will be Yang Qing, current chairman of Dongfeng, and the general manager will also come from Dongfeng, according to the report.
Changan's chairman Zhu Huarong is not on the management list of the new auto group, seemingly related to his impending retirement in 2025, the report noted.
If Dongfeng and Changan are successfully reorganized, the new auto group will have annual sales of about 4.58 million units, and will overtake BYD to become China's No. 1 carmaker, as well as the world's fifth-largest auto group, 36kr said.
The new auto group is expected to first overhaul its supply chain.
In the future, the two companies will likely integrate supply chain resources and unify the procurement of parts and technologies from high-quality suppliers, according to the report.
This is seen as a key step for the two state-owned auto giants to consolidate their resources to cope with a new market environment. With the rapid electrification of China's auto industry, carmakers are facing new challenges in their operations.
Zhang Yuzhuo, chairman of the State-owned Assets Supervision and Administration Commission of the State Council, or SASAC, said in March 2024 that state-owned car companies had been slow to move on new energy vehicles (NEVs), hinting that more policies were on the way.
In terms of regulating state-owned assets, China needs to incentivize companies to innovate boldly and break down some of the institutional barriers to development, such as in NEVs, Zhang said in a group interview with the media at the time.
State-owned automakers were not developing fast enough in the NEV sector, and the country would adjust its policy to give the three centrally-administered automakers, separate assessments of their NEV businesses, he said.
Zhang did not directly mention the names of the three automakers in that interview, but the centrally-administered automakers directly regulated by SASAC are FAW Group, Dongfeng and Changan.
The FAW has yet to make a similar announcement.
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