Dongfeng-Changan merger would create world’s fifth largest carmaker

Chinese state-owned auto giants Dongfeng Motor and Changan Automobile have announced restructuring plans, fueling speculation that the two automakers may merge to form one of the world’s largest automotive groups. If realized, the newborn group would surpass BYD as China’s biggest carmaker and rank as the world’s fifth-largest auto manufacturer.

While the automotive world had set its focus on the failed merger talks between Honda and Nissan, a similar move seems to be taking place a bit more up North. Over in China, both Dongfeng and Changan simultaneously announced that their indirect controlling shareholders were planning reorganizations.

These restructuring measures involve leaner operations for the companies, for which mergers or joint ventures seem the ideal leveraging tool.

The statements also emphasized that the reorganization would not change their actual controllers, as the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) would remain the ultimate overseer. Although neither company explicitly mentioned a merger, the timing of the announcements fuels widespread speculation.

Dethroning BYD

What if such a merger materializes? The newly formed auto group would be the world’s fifth largest, with annual sales rising to approximately 4.58 million vehicles. The group would also dethrone private-owned BYD as the best-selling car maker in the world’s biggest vehicle market in its homeland.

Structurally, the cooperation would entail overhauling the supply chain at both companies, aiming to integrate resources and unify procurement strategies. Streamlining component sourcing and optimizing shared technology platforms would help both companies more successfully navigate China’s price wars.

Chinese media outlet 36kr reports suggest that Dongfeng is expected to dominate the rumored new entity. Dongfeng Chairman Yang Qing is set to lead the combined group, while the general manager will also come from Dongfeng. Changan’s Chairman Zhu Huarong is not included in the prospective leadership lineup, likely due to his planned retirement in 2025.

Distinct ownership structures

Despite the potential benefits of scale, industry insiders highlight significant hurdles in executing such a merger. Dongfeng and Changan have distinct ownership structures—the first operates as an independent state-owned entity.

At the same time, the latter is controlled by China South Industries Group Corporation (CSGC), a conglomerate involved in munitions, electronics, and automotive manufacturing.

Additionally, both automakers operate multiple sub-brands and joint ventures with foreign manufacturers. A merger could result in internal competition and potential brand cannibalization. Overlapping product lines in key market segments could create challenges in brand positioning and sales strategies.

As a result, analysts suggest that a full merger may not be the immediate goal. Instead, the two companies could explore a strategic alliance model similar to the Renault-Nissan-Mitsubishi Alliance, which would enable shared research and development, supply chain efficiencies, and global market expansion while maintaining brand independence.

State’s push for consolidation

China’s state-owned enterprises (SOEs) have faced mounting pressure to accelerate their transition to new energy vehicles. Neither Dongfeng nor Changan met their 2024 sales targets, adding further pressure to restructure.

Dongfeng’s joint ventures with Nissan and Honda have struggled, posting double-digit declines. At the same time, its self-owned brands have shown relative resilience, driven by the growing demand for New Energy Vehicles.

In Europe, Changan offers the Deepal in selected markets (Scandinavia, The Netherlands…, etc.), while Dongfeng has recently launched the distribution of its Voyah range, the budget-friendly Dongfeng Box, and Forthing through independent distributors.

Rumour or not, as the Chinese car industry matures, major shifts are inevitable. Whether through a merger or a strategic alliance, Dongfeng and Changan’s realignment could redefine China’s state-owned automotive sector in the coming years.