In recent years, China’s automotive industry has been undergoing profound transformation. The wave of intelligent electrification, intensifying international competition, and adjustments in policy direction have all intertwined, continuously reshaping the industry landscape. Every restructuring and collaboration among automakers sends ripples through the market.

As the "Three-Year Action Plan for Central SOE Restructuring" led by the State-owned Assets Supervision and Administration Commission (SASAC) enters deep waters, the latest restructuring event involving central SOEs in the automotive sector has once again sparked heated discussions within the industry. The gears of fate for two automotive giants, Chang’an and Dongfeng, have begun to turn. Could this mark the beginning of the most significant strategic cooperation in China’s automotive history?

On February 9, Chang’an Automobile Co., Ltd. and Dongfeng Motor Group Co., Ltd. successively issued announcements stating that their indirect controlling shareholder and controlling shareholder—China South Industries Group Corporation and Dongfeng Motor Corporation—are "planning a restructuring with other centrally administered state-owned enterprises." This may lead to a change in controlling shareholders, potentially bringing new shifts to China's automotive industry.

Although FAW Group is not yet involved in this round of restructuring, the development naturally leads to speculation. CouldChina Second Automobile Group be revived once again?

In recent years, the pace of central SOE restructuring has accelerated, particularly in the manufacturing sector. Policies encourage resource integration to enhance competitiveness. Cases such as the merger of CRRC, the restructuring of China’s northern and southern shipbuilding groups, and the merger of China Electronics Technology Group Corporation (CETC) with China Hualu Group all reflect the government's push for the optimization and consolidation of central SOEs.

Currently, China’s automotive industry is facing significant transformation and challenges. The rise of new energy vehicles (NEVs) and the shrinking market share of traditional fuel-powered vehicles have made it imperative for central SOEs in the automotive sector to integrate and restructure in order to strengthen their core competitiveness. This will help China transition from being a major automobile-producing country to a global automotive powerhouse.

SASAC Director Zhang Yuzhuo has previously stated that the new energy vehicle businesses of FAW, Dongfeng, and Chang’an will be evaluated separately. Similarly, SASAC Deputy Director Gou Ping has expressed support for central enterprises to engage in high-quality investments, mergers, and professional integrations to accelerate the acquisition of core industry resources and key technologies.

For China’s central SOE automakers, restructuring is no longer an option but an inevitable question of the times. A Chinese automaker among the world's top 10 automotive groups is now on the horizon.

Chang’an Automobile stands out among central SOE automakers, demonstrating strong capabilities in both independent brands and the new energy sector. In 2024, Chang’an’s sales reached 2.683 million units, a year-on-year increase of 5.1%, marking its highest sales in nearly seven years. Among these, sales of independent brands reached 2.226 million units, accounting for over 80% of the total. NEV sales hit 734,000 units, growing by 52.8% year-on-year, while overseas sales surged 49.6% to 536,000 units, far exceeding the industry average.

Chang’an continues to make strides in the NEV sector while fostering close collaborations with companies like Huawei and CATL in the field of intelligent technology. Its brands such as Deepal, Avatr, and Chang’an Qiyuan have performed remarkably well. Moreover, its overseas expansion has been rapid, with particularly strong performance in Southeast Asia and South America.

In contrast, Dongfeng Motor Group’s performance in 2024 was somewhat weaker, with total sales reaching 1.895 million units, down 9.2% year-on-year. Its joint ventures, Dongfeng Honda and Dongfeng Nissan, have struggled, experiencing consecutive years of declining sales. Although its independent brands, such as Dongfeng Fengshen and Voyah, posted impressive growth rates of 82.4% and 59.3%, respectively, their overall sales scale, brand influence, and product competitiveness are not yet sufficient to support Dongfeng’s long-term growth.

Both Chang’an and Dongfeng have accumulated valuable technical, market, and brand resources in their respective development journeys. Chang’an has a notable advantage in NEVs and intelligent technology, with its "Shangri-La Plan" and "Beidou Tianshu Plan" providing a strong foundation for its transformation and upgrade. Meanwhile, Dongfeng has unique expertise in automotive equipment, components, commercial vehicles, and international expansion.

Speculatively, if the two companies were to combine, their total annual sales would exceed 5 million units, potentially placing them among the world's top 10 automotive groups. This could drive the high-quality development of China’s automotive industry and elevate the global influence of Chinese brands. The two companies' dozens of national-level smart manufacturing bases could enhance production efficiency through flexible production line modifications, significantly reducing per-unit manufacturing costs. Additionally, a dual-headquarters model spanning Wuhan and Chongqing could form a "Yangtze River Economic Belt Automotive Corridor," fueling imagination for the rise of a trillion-yuan automotive empire.

However, history has shown that central SOE mergers are never fairy tales. The restructuring process will involve multiple challenges, including adjustments to management structures, brand positioning realignment, and corporate culture integration. Personnel reshuffling, supply chain disruptions, and concerns from capital markets can not be ignored.

Chang’an and Dongfeng may not opt for a direct merger but could instead explore an industrial alliance, capital cooperation, or strategic collaboration. This could take the form of equity partnerships in specific business units, joint ventures, or the establishment of a holding automotive group while maintaining their existing structures.

On the eve of a once-in-a-century transformation in the automotive industry, the potential "marriage of the century" between Chang’an and Dongfeng is far from just a numbers game. When market forces align with national strategy, what we anticipate is not just the birth of a trillion-yuan automotive empire, but also a decisive leap in China’s journey from being a major automobile producer to a global automotive powerhouse.

The future is here—China’s automotive "national fleet" is finally surfacing!