DongFeng-Changan Merger Rumoured, Could Overtake BYD If Approved

Rumours have surfaced indicating that two major state-owned Chinese car companies could merge under a single holding group. The move aims to tackle overcapacity and boost competitiveness in the electric vehicle (EV) market.

Dongfeng Motor Group and Chongqing Changan Automobile announced separately that their parent companies were considering asset deals that could change their ownership structure. However, they assured that any restructuring of their parent companies would not immediately impact daily operations.

Following said announcement, Dongfeng Group’s shares surged 26% to HK$4.06 on Monday, while Changan Automobile’s rose 4.7% to RMB14.18.

In a statement to South China Morning Post (SCMP), Ivan Li, a fund manager at Loyal Wealth Management, noted that though no official confirmation has been given by both brands, the central Chinese government’s call to consolidation will ease fierce competition in the auto sector.

If the merger proceeds, the new entity would become China’s largest carmaker by sales, overtaking BYD, which sold 4.37 million vehicles last year. In contrast, Dongfeng sold 2.48 million vehicles, while Changan delivered 2.68 million, totaling 5.16 million cars.

Wuhan-based Dongfeng Motor has joint ventures with PSA Peugeot Citroen, Nissan, and Honda. Dongfeng Motor Corp (DMC), its parent company, was once called the Second Automobile Works of China.

Meanwhile, Chongqing-based Changan Automobile is controlled by Beijing's China South Industries Group (CSIG). It maintains partnerships with Ford and Mazda. Both CSIG and DMC are governed by the State Council's state-owned assets regulator.

China has been the world’s largest car market since 2009 with an annual manufacturing capacity of 40 million vehicles, but it sells only about 23 million domestically. It also leads the global EV market as its EV and plug-in hybrid (PHEV) car sales account for 60% of worldwide sales.

Since July, EV penetration in China has exceeded 50%, but intense price competition has squeezed profit margins since 2024. Only firms like BYD, Li Auto, and Huawei-backed Aito have reportedly managed to turn a profit.

In 2024, Chinese carmakers reduced prices on a record 227 models, up from 148 in 2023.