A possible merger between two of the largest state-owned car brands in China caused shares in one of them to rise by 85 percent on Monday despite rumors of bankruptcy.
Rumors of bankruptcy have led two of the largest state-owned car brands in China to talk about merging, something that actually sent the share price up by a whopping 85.6 percent.
The wild jump happened on Monday for Dongfeng Motors, whose shares are listed on the Hong Kong stock exchange.
The stock skyrocketed because the car brand's parent company, Dongfeng Motor Corporation, must restructure to avoid bankruptcy.
Reuters writes.
The stock has since fallen again. But that doesn't change the fact that Dongfeng is now worth more on paper than when the brand was at its absolute high in July 2022.
Changan Auto, which postponed a European launch last year, also issued a statement on Sunday that closely resembles Dongfeng's plans. This, in turn, quickly led stock markets to speculate about a merger between the two brands.
This may explain why Dongfeng shares rose explosively the very next day. The communist regime in Beijing controls both Dongfeng and Changan. That is not going to change, even though the companies are now trying to save themselves.
On the contrary, the government in Beijing has encouraged its car brands to become less dependent on collaborations – the so-called joint ventures – with European car manufacturers in particular. The communist government prefers that both any profits and the car brands' technology remain in China.
Conversely, Ford CEO Jim Farley has said that the Western automotive industry is 10 years behind China, at least when it comes to electric cars.
Farley sees only one way out – namely for Western car brands to connect with the Chinese, as China did with Western know-how just 20 years ago.
In addition to Dongfeng and Changan, the Chinese state also owns FAW Group Corporation, which began building Volkswagen models under license back in 1991. For example, the Chinese only stopped building the Jetta Mk.2 from 1984 in 2013.
Here in Denmark, it is Wismo Group, the former KW Bruun, that imports Dongfeng cars. But it is initially under the sub-brand Voyha.
The much cheaper Dongfeng Box could become Denmark's cheapest car. Also cheaper than the Volkswagen ID.1, which is expected to be priced around 150,000 kroner. Read more about it here .
