China's government is considering forcibly merging the car brands Dongfeng and Changan. The goal is to create a national competitor to BYD.
China's government is currently considering what could be one of the largest mergers in the automotive industry ever.
State-owned car giants Dongfeng Motor Corp and Chongqing Changan Automobile may lose their independence and instead be merged into one large company.
This is part of a plan to strengthen the production of electric cars. A merger could create a new strong competitor to market leader BYD.
The Chinese government is actively pushing for change. The goal is to create a more streamlined and efficient automotive industry in the country.
Consolidating the country's major car brands is intended to reduce overlap and waste in the industry. It is also intended to accelerate the government's goal of only allowing electric cars.
A vice chairman of the State-Owned Enterprises Commission recently spoke about the need. The commission, which oversees about 100 state-owned enterprises, is urging automakers to restructure their operations.
According to Nikkei Asia, this happened at an event in Beijing.
The idea behind it is clear. By pooling development and production resources, the brands can become stronger. They should be able to compete better, especially against the more established brands. Here the Chinese themselves mention BYD.
The commission is keeping an eye on several large state-owned players. This applies specifically to Chongqing Changan Automobile and Dongfeng Motor Corp. China FAW Group, which cooperates with Volkswagen, among others, is also among the state-owned car groups that the communist regime is keeping an eye on.
State-owned Chinese automakers consider merger
Rumors of a possible merger between Dongfeng and Changan began to circulate in February, with the South China Morning Post reporting that the government was considering placing them under a joint holding company. However, this has not yet been officially confirmed.
If the merger goes through, the new company could be huge. It is estimated that the combined company could potentially overtake BYD. This would make it China's largest electric car manufacturer, which would be a significant change to the market.
Sales for the two companies are already strong. Last year, Changan sold 2.68 million cars. Dongfeng sold 2.48 million cars in the same period. That places them among the big players.
But in the electric car space, they have struggled to keep up. They have not kept pace with BYD in particular in the transition to electric cars. Both companies failed to meet their own sales targets for electric cars last year.
"The restructuring, if it comes to fruition, would be a big step," says an analyst from major bank Morgan Stanley about the potential deal.
– This will be of great importance for China's automotive industry in the long term.
The battle for the electric car market in China is heating up
Ivan Li, a fund manager at Loyal Wealth Management, also commented on the situation. "The two companies' statements clearly point to a potential merger of the state-owned parent companies, although they have not said so directly," he noted.
Li added that the government likely sees consolidation as a way to reduce internal competition among state-owned giants. It could also better position the sector for long-term success on a global scale.
Although electric vehicle performance has been below expectations, both companies play a central role. They are deeply integrated into China's extensive automotive ecosystem, not least due to their long-standing partnerships with foreign brands.
Dongfeng continues to have joint ventures with international automakers such as Nissan and Honda. It also collaborates with European brands Peugeot and Citroën. Changan has similar partnerships with Ford and Mazda.
These many existing alliances could potentially complicate a possible merger between the two giants, but at the same time, the partnerships also underscore the companies' strategic value in the global market.
A possible merger of Dongfeng and Changan will undoubtedly send tremors through the Chinese auto industry.
This could have a major impact on competition, especially in a market that is becoming increasingly difficult to make money in. You can follow developments in the global car market – which has already seen bankruptcies in the course of 2025 – on Boosted.dk every day.
