State-owned Chinese carmakers Dongfeng, Changan likely to combine, eclipsing BYD

Company combining Dongfeng and Changan could allocate resources to the most competitive products and technologies, analyst says

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New cars await transport in a distribution center of Chinese state-owned automobile manufacturer Changan in southwest China’s Chongqing municipality on January 12, 2025. Photo: AFP

Published: 5:30pm, 10 Feb 2025

Beijing is likely to place two of its state-owned car companies under one holding group after their flagship listed firms hinted at a possible merger of their parent companies, a move aimed at tackling overcapacity and enhancing competitiveness in the electric vehicle (EV) market.

Both Hong Kong-listed Dongfeng Motor Group and Shenzhen-listed Chongqing Changan Automobile said in exchange filings on Sunday that their controlling shareholders were considering asset deals that might lead to changes in their ownership structure. They did not elaborate.

Dongfeng Group shares jumped 26 per cent to HK$4.06 on Monday, while Changan Automobile climbed 4.7 per cent to 14.18 yuan.

“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,” said Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. “The Chinese government has reasons to encourage consolidation of the automotive sector as cutthroat competition has ensnared most of the players.”

A newly created entity that controls both Dongfeng Motor and Changan Automobile would become China’s largest carmaker by sales, eclipsing Shenzhen-based BYD, the world’s largest EV builder.

In 2024, the two companies delivered 5.16 million cars – 2.48 million for Dongfeng and 2.68 million for Changan. BYD sold 4.27 million EVs.

“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 said in a research note on Monday, adding that a merged group would allocate resources to brands with more competitive products and technologies.