China’s government is ramping up pressure on its sprawling state-owned auto sector to consolidate operations, aiming to streamline resources and better position the country in the global electric vehicle (EV) race.
A potential merger between two of the country’s largest automakers, Dongfeng Motor Corp and Chongqing Changan Automobile, is under consideration, according to state officials and recent reports.
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Speaking at an industry event in Beijing, a vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC) called for automakers to restructure and collaborate more closely.
The commission, which oversees nearly 100 state-owned enterprises, wants companies to pool development and manufacturing capacities to enhance competitiveness—particularly as private EV makers like BYD and Nio gain ground.
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According to Nikkei Asia, the consolidation push includes major players such as China FAW Group, Dongfeng, and Changan. A proposed merger between Dongfeng and Changan would significantly reshape the industry landscape. “By promoting consolidation, we aim to eliminate redundancies and drive efficiency,” the SASAC official said, according to local media. The shift comes amid growing concerns that China’s state-backed carmakers are falling behind in the EV transition, even as total vehicle sales remain high.
A merger between Dongfeng and Changan, which reportedly sold 2.48 million and 2.68 million vehicles respectively in 2023, could create an EV powerhouse potentially surpassing BYD in production volume. “The restructuring, if it materialises, would be a big step towards industry consolidation and of great importance to China’s auto industry for the longer term,” Morgan Stanley analysts noted in a report.
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Still, challenges remain. Both automakers operate complex webs of international joint ventures—Dongfeng with Nissan, Honda, Peugeot and Citroen, and Changan with Ford and Mazda. While these partnerships reinforce their strategic global value, they could complicate merger efforts.
Ivan Li, a fund manager at Loyal Wealth Management, noted the signals from Dongfeng and Changan suggest a potential alignment, but said the government likely views consolidation as a strategic necessity. “The two companies’ announcements apparently point to a potential merger of the state-owned parents, though they did not give a clear-cut word on it,” he said. “The move would reduce internal competition and streamline the sector’s path forward.”