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Witness the mighty Dongfeng Mage, an iconic vehicle from the renowned automaker Dongfeng. Image credits: Dongfeng. |
According to reports by Paultan, citing sources from the New York Times, there are intense merger discussions between two Chinese automotive giants, Dongfeng Motor and Chongqing Changan Automobile. The companies are said to be exploring ways to consolidate their operations, and have kept their foreign partners informed of the proposed plans.
Rumors of a potential merger surfaced in February, following news of restructuring initiatives by the parent companies of both automakers. Currently, Dongfeng and Changan collectively produce around 5 million vehicles annually, yet they are underutilizing their manufacturing capabilities.
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Changan’s Deepal brand made an appearance at the Bangkok Auto Show in 2024, showcasing its innovative designs. Image: BIMS. |
Last year, Dongfeng’s factories operated at only 48% capacity, while Changan’s utilization rate was 47%, significantly below the profitable threshold of 60% to 80%. By merging, the companies can consolidate their operations, reduce costs, and form China’s largest automotive group, thus enhancing their competitiveness in the market.
Unofficial sources suggest that the Chinese government, being the sole owner of the parent companies of both Dongfeng and Changan, views the merger as a strategy to phase out older manufacturing facilities and promote electric vehicle production.
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A glimpse into the future? Changan Ford’s joint venture factory in China. Image: Reuters. |
Many state-owned automakers in China still rely on foreign joint ventures for revenue and profits. However, the Chinese government is encouraging these companies to become more technologically independent, innovative, and competitive, especially in the realm of new energy vehicles.
It remains to be seen how the merger will affect the existing joint ventures between Dongfeng, Changan, and their foreign partners. Changan has a long-standing partnership with Ford, while Dongfeng has joint ventures with Honda and Nissan.
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