Changan and Dongfeng Automotive Merger

In recent discussions surrounding the restructuring efforts between two major Chinese automotive companies, Dongfeng and Changan, many have expressed their surprise, perceiving the situation as a sudden developmentHowever, this merger is not as unexpected as it may appear; the conversation regarding the merger and consolidation of central automotive enterprises has been ongoing for nearly a decade.

As early as 2014, there were talks about the potential merger of key players, namely "FAW, Dongfeng, and Changan." This sparked humorous suggestions, with many jokingly proposing the name "China Automotive Group" or its abbreviated form “Zhongqi.” Fast forward ten years, and while the concept of "Zhongqi" is still being navigated, there have been notable shifts in the leadership dynamics of these three mega enterprises.

Over the past decade, it has been noticeable that leadership positions across these three companies have been rotating frequentlyFor instance, a prominent figure, Zhou Zhiping, who served as the secretary of Changan, has transitioned between positions in FAW and Dongfeng over the years, reflecting a trend where management interchangeability leads to closer ties between these organizations.

The relationship these firms have nurtured over the years suggests they have always functioned more as allies than competitorsThis closeness indicates that the merger process will likely be smooth, without the prolonged periods of adjustment typically expected in such scenarios.

This restructuring currently involves Changan and Dongfeng, with FAW not participating at this stageHowever, given the industry landscape, it is plausible that FAW might eventually join the consolidation process, reinforcing the ongoing discourse about the creation of "Zhongqi."

However, it’s critical to recognize that the scale of these firms is gargantuan, and achieving true integration will undoubtedly be a lengthy endeavor

Advertisements

As of now, the merger remains at the shareholder level, and operational management integrations are yet to be tackled.

In fact, the changes occurring between the two companies concern merely indirect controlling stakes, and the fundamental operational structures of these publicly-listed entities remain unaffectedThis suggests that, in the immediate term, the impact on day-to-day operations may be minimal.

Looking to the future, however, a deeper integration is anticipated, albeit graduallySome skepticism surrounds the merger due to perceptions about Dongfeng’s recent performance; many believe Changan’s strong performance might get sullied by this associationNonetheless, asserting such conclusions at this juncture is hastyThe possibility exists for Changan's proactive strategies to elevate Dongfeng's performance instead.

Changan indeed outperformed Dongfeng in terms of sales in recent years, indicating that the latter has faced significant challengesFor instance, projections for Dongfeng forecast total sales of around 2.48 million units for 2024, a number that closely trails Changan’s projected 2.68 million in the same timeframeHistorically, Dongfeng’s trajectory seems to be taking a downward turn, as evidenced by first-month figures indicating significant sales declines.

In January 2025, Dongfeng’s cumulative sales plummeted by about 48.5%, while the parent company, Dongfeng Motor Group, reported similar downturnsThese troubling statistics highlight the pressing issues Dongfeng is grappling with, evidenced by their progressively poor sales performances compounded by the looming threat of similar declines moving forward.

In stark contrast, Changan’s sales figures maintained a healthy standing

Advertisements

With an impressive total spanning approximately 275,700 units, they demonstrated relative stability in overall performance, reflecting a mere 2% decrease year-on-yearIn stark comparison, this resilience outlines the widening gap in market performance between the two automakers.

Thus, one cannot overlook the stark reality that Changan outshines Dongfeng significantly, making it evident that the performance gap is not only real but expandingThe differences in business performance across the two firms are also telling of their respective trajectories, and the topics surrounding Dongfeng’s recent struggles raise genuine concerns.

Changan's background is noteworthy; originally part of the China South Industries Group Corporation, they were established separately in 2005, reforming the company that had been in existence since the mid-20th centuryBy 2019, the firm adopted the name "Changan Automobile," solidifying its place amongst China’s top automotive manufacturers.

Undoubtedly, due to this solid foundation, Changan has emerged as one of China’s four leading automotive groups, and many observers consider it the top performer among its peers.

Conversely, the same cannot be said for Dongfeng, which has fallen behindComparatively, FAW and SAIC do not exhibit the same level of ambition as Changan, further highlighting the disparities within the industry.

However, from a foreign investment perspective, Changan has not always enjoyed a favorable reputationThere’s a saying that suggests, “A century of foreign investment, destroyed by Changan.”

For instance, Ford partnered with Changan in 2001 and initially achieved success, with newly launched vehicles selling 17,000 units in their first year—a notable achievement at the time

Advertisements

Popular models during those years included the Ford Focus and the Ford Mondeo, both of which were widely accepted by consumers.

Nevertheless, after a few years of strong sales, "Changan Ford" gradually ceased production, meaning that today’s offerings do not include combustion A-Class vehicles.

The sentiment script, “A century of Ford, destroyed by Changan,” began circulating amid these developments.

Likewise, Mazda observed Changan’s fruitful collaboration with Ford and expressed interest in similarly entering the marketConsequently, in 2005, a joint venture was established that evolved into "Changan Ford Mazda Automobile." However, due to complications, Mazda soon separated and established “Changan Mazda” independently.

Mazda has garnered a dedicated fan base, known for its vehicles’ exceptional handling characteristics, yet its performance in the market today leaves much to be desired.

In 2011, Changan then collaborated with Citroën to form a joint venture known as CAPSA, which, at its peak, was the largest joint venture in China, boasting impressive production capabilities.

However, despite ambitious goals, actual sales figures were disappointing; for example, in 2019, CAPSA recorded monthly sales as low as ten units.

Be it Ford, Mazda, or Citroën, these renowned international companies faced setbacks after partnering with ChanganNonetheless, attributing this downfall solely to Changan is somewhat unfair, as these companies also had partnerships with other Chinese automakers.

For instance, Mazda joined forces with FAW to establish a joint venture called FAW Mazda, which ultimately dissolved in 2021. As this demonstrates, the struggles of foreign players do not solely stem from their relationships with Changan.

The faltering performance of these global automotive giants in the Chinese market may hint at deeper systemic issues relating to partnership approaches and business models.

Historically, foreign joint ventures hinged on a basic model: the foreign partner contributed capital, brand equity, and technology, while the Chinese enterprises offered funding, land, and labor

With powerful brands and superior technological prowess, foreign firms were welcomed with open arms.

The primary objective of such collaborations was not merely the economic viability of the venture itself but rather the transfer of advanced technology that could be utilized to foster China’s indigenous enterprises.

Once these progressive technologies were secured, the next logical step for Chinese automakers like Changan was to develop their own productsDrawing on their experiences with various foreign partners, Changan rapidly rolled out models like the Benben and the CS75.

Notably, the CS75 underwent numerous upgrades and iterations, culminating in the highly successful CS75 PLUS release in 2019, which racked up impressive monthly sales figures, even ranking among the top contenders in the SUV market.

Consequently, Changan’s present-day success can be attributed to its strategic leveraging of technologies acquired from international automotive partners.

As the automotive industry transitions towards electric vehicles, it becomes increasingly apparent that reliance on foreign technology is waningChinese manufacturers, having established themselves as front-runners, are now at the forefront of the global automotive landscape.

At this juncture, the competitive landscape consists predominantly of domestic firms vying for market share, compelling an environment where further restructuring and integration of state-owned automotive enterprises seems unavoidable.

The automotive sector occupies a pivotal position in industrial growthChina's ambition in this arena necessitates a concerted effort to conquer international markets

Advertisements

Advertisements