China’s state-owned automotive giants Dongfeng Motor and Changan Automobile almost simultaneously announced reorganization plans, which hinted at the possible merger of the two to become the world’s 5th largest automotive group by annual sales.

In fact, the combined 2024 annual sales of Dongfeng and Changan (c. 4.6 million units) will be enough to overtake China’s top carmaker BYD and the world’s fifth largest automaker.

On the back of this potential blockbuster merger is two state-owned enterprise automakers that failed to meet their 2024 annual sales target.

In fact, Changan sold 2.68 million vehicles in 2024, a 14.8% year-on-year increase, but still missed the annual target of 2.8 million units.

Source: AVATR

Changan announced that it will aim to sell 3 million vehicles in 2025, a 12% YoY increase, of which 1 million will be exported to global markets.

Dongfeng on the other hand, missed its 2024 annual target by a mile, selling 1.89 million vehicles while targeting 3.2 million units.

Part of the reason is Dongfeng’s joint-venture brands struggled amidst the rising competition from domestic brands.

Dongfeng Nissan and Dongfeng Honda sales were down by 12.7% and 29.2% YoY, respectively.

Announcement details and timing

On February 9, Dongfeng Motor Corporation (hereinafter referred to as "Dongfeng") and Dongfeng Electronic Technology Co., Ltd. (hereinafter referred to as "Dongfeng Tech") both issued announcements regarding potential changes in their indirect controlling shareholders.

On the same day, Changan Automobile also issued a similar announcement, stating that its indirect controlling shareholder, China South Industries Group Corporation (CSGC), is planning a restructuring with other state-owned enterprises (SOEs) and central enterprises.

In response to speculations about a potential merger between Dongfeng Group and Changan Automobile, a representative from Dongfeng Group commented, "Please refer to the current announcement. The matter is still in the planning stage."

According to the announcements, on February 9, Dongfeng received a notification from its indirect controlling shareholder, Dongfeng Motor Group Co., Ltd. (hereinafter referred to as "Dongfeng Group"), stating that Dongfeng Group is planning a restructuring with other state-owned and central enterprises.

This restructuring may result in changes to the indirect controlling shareholder of Dongfeng but will not affect the actual controller. Relevant arrangements still need to go through procedural steps and obtain approvals from the relevant regulatory authorities.

The restructuring will not have a significant impact on the company's normal production and operation activities.

Similarly, Dongfeng Tech announced that on February 9, it received a notification from its indirect controlling shareholder, Dongfeng Group, about the planned restructuring with other state-owned and central enterprises.

This restructuring may lead to changes in the indirect controlling shareholder of Dongfeng Tech but will not change the actual controller.

Relevant arrangements need to be finalized and require approval from the pertinent authorities. The restructuring will not significantly affect the company's normal production and operations.

On the same day, Changan Automobile also issued a similar announcement, stating that on February 9, it received a notification from its indirect controlling shareholder, CSGC, about the restructuring plans with other state-owned and central enterprises.

This restructuring may result in changes to Changan Automobile's controlling shareholder but will not alter the actual controller.

The relevant arrangements need to follow procedural steps and gain approval from the regulatory authorities.

The restructuring will not significantly impact Changan Automobile's normal production and operational activities.