China May Compel Major Automakers to Consolidate | Carscoops

      Changan may merge with Dongfeng to surpass BYD and become the largest EV manufacturer in China

      8 hours ago

      by Brad Anderson

      The Chinese government aims to compete with BYD.

      Some reports indicate that a merger between Changan and Dongfeng could be on the table.

      Certain state-owned brands have been slow to embrace electric vehicles.

      China's automotive industry is vast, rapidly evolving, and at times challenging to navigate without a detailed guide. Major Western companies like Toyota and Volkswagen, which are well-established in the market, operate numerous joint ventures producing overlapping models.

      With hundreds of brands, many of which are state-owned, competing in an increasingly intense marketplace, the Chinese government is now advocating for a more streamlined strategy. The goal is to consolidate key state-supported manufacturers to enhance efficiency, minimize redundancy, and accelerate the transition to electric vehicles.

      Read: China’s Dongfeng Introduces the $25,000 Nammi Box EV in Europe

      During a recent event in Beijing, the vice chairman of China’s State-owned Assets Supervision and Administration Commission called for automakers to restructure and realign their operations. The idea is that by sharing development and manufacturing resources, these companies could enhance their competitiveness, especially against nimble private sector brands.

      The commission oversees around 100 state-owned enterprises, including Chongqing Changan Automobile, Dongfeng Motor Corp, and China FAW Group, as reported by Nikkei Asia.

      In February, the South China Morning Post reported that the government was contemplating placing Dongfeng and Changan under a single holding company. Should this occur, the newly formed entity could surpass BYD and emerge as China's largest EV producer, representing a significant shift in the industry landscape.

      “The potential restructuring would be a major advancement toward industry consolidation and hold great significance for the future of China’s automotive sector,” stated a Morgan Stanley analyst regarding the possible merger.

      Momentum for Consolidation

      Last year, Changan sold 2.68 million vehicles, while Dongfeng sold 2.48 million. However, both have struggled to keep up with BYD in the electric vehicle market and fell short of their own EV sales targets last year.

      Ivan Li, a fund manager at Loyal Wealth Management, remarked, “The announcements from both companies suggest a possible merger of the state-owned entities, although they have not provided a definitive statement on it.” He further noted that the government likely views consolidation as a strategy to decrease internal competition and better position the industry for long-term success.

      Joint Ventures Continue to Be Significant

      Despite their lackluster performance in the EV sector, both companies are still deeply embedded in China's broader automotive ecosystem. Dongfeng has joint ventures with Nissan, Honda, Peugeot, and Citroen, while Changan collaborates with Ford and Mazda. These partnerships may complicate any merger but also underscore the strategic importance of both companies in the global marketplace.