On February ninth, a number of corporations underneath the Dongfeng Motor Company (equivalent to Dongfeng Motor Group and Dongfeng Honda) and China South Industries Group (CSGC, mum or dad firm of Changan Motors) concurrently introduced they’re in discussions with different state-owned enterprises (SOEs) concerning restructuring.
The simultaneous bulletins, nonetheless, emphasised this won’t result in a change in company possession, although some controlling shareholders could change. The last word controlling shareholder will stay the State-owned Belongings Supervision and Administration Fee of the State Council (SASAC), the government-run SOE controller.
Merger Hypothesis and Challenges
This annoucement has sparked widespread hypothesis within the trade. The timing of the bulletins from the 2 main state-owned auto producers raises rumors of whether or not a merger is on the horizon. A mixed Dongfeng-Changan entity would doubtless see gross sales of over 4.5 million automobiles yearly, overtaking BYD.
This restructuring of Dongfeng and Changan aligns with SASAC’s latest efforts to optimize state-owned enterprises. SASAC acknowledged in 2024, they goal to scale back inside competitors and goal for specialization specializing in particular sectors with the businesses they handle.
A full merger would face challenges, nonetheless, as Dongfeng and Changan have completely different possession construction the place Dongfeng operates as an unbiased SOE, whereas Changan falls underneath management of the munitions, autos, and electronics producer CSGC. Such a large restructuring would additionally require a re-organization of not solely the producers themselves, but in addition their investments and subsidiaries.
Moreover each Dongfeng and Changan have sturdy model historical past and overlaps with their product strains when it comes to worth vary. A merger may result in inside competitors and model cannibalization. Administration constructions would additionally have to be built-in, including to the already complicated capital restructuring.
It has been speculated a full merger might not be the top purpose as the 2 corporations could goal for an “alliance mannequin”. This might contain strategic cooperation in areas equivalent to R&D, provide chains, and worldwide growth, permitting every firm to retain independence. A related instance is the Renault-Nissan-Mitsubishi Alliance, a mannequin that helps cut back prices whereas preserving model identification.
Trying again to 2024
Trying again at 2024, neither Dongfeng nor Changan achieved their beforehand set gross sales targets.
Changan Auto had set a 2024 gross sales goal of two.8 million automobiles. In line with manufacturing and gross sales stories, Changan’s whole gross sales for 2024 reached 2.68 million items, nonetheless reaching a 14.79% year-on-year improve. For 2025, Changan Auto goals for whole gross sales of three million items, a 12% year-over-year development, with 1 million NEV gross sales and 1 million exports.
In the meantime, Dongfeng Group had set a 2024 gross sales goal of three.2 million automobiles. Nevertheless, precise gross sales information confirmed that Dongfeng’s whole gross sales for the yr stood at 1.89 million items, down 9.2% year-over-year. The corporate set an bold 2025 goal of three million gross sales, with a great purpose 3.2 million. This contains NEV gross sales exceeding 1 million and abroad exports surpassing 500,000.
Dongfeng has significantly struggled with its three way partnership manufacturers with Dongfeng Nissan and Dongfeng Honda down 12.7% and 29.2% year-over-year respectively. Dongfeng’s self-owned manufacturers have been a vibrant spot, nonetheless, and many of the firm’s development has come from self-branded NEVs.
Restructuring doesn’t instantly impression regular manufacturing and enterprise operations, nonetheless, given the reform within the works for state-owned enterprises, these strikes entail a broader push for effectivity in SOEs.
As China’s auto trade faces intensifying competitors, SOEs are more and more underneath strain to outlive the transition to NEVs. As personal entities equivalent to BYD and Huawei’s Concord Clever Mobility Alliance (HIMA) see development and increase abroad, SOEs might want to improve their competitiveness.
Sources: Yiche, 36kr
