China’s Dongfeng and Changan to merge to form world’s seventh-largest automaker

If Nissan and Honda had merged, it would have created the world’s third-largest automaker, but the talks have failed. However, in the highly competitive Chinese auto market, consolidation is inevitable, and new rumors of a possible merger between the two major players have come from China, from Dongfeng Motor and Changan Automobile.

Image source: Dongfeng Motor

Both state-owned Chinese companies simultaneously announced plans to reorganize, involving other Chinese government-controlled entities. The simultaneous announcements themselves have fueled rumors that Dongfeng and Changan are set to merge, with the former dominating the new conglomerate. The new Chinese auto giant is expected to be chaired by Yang Qing, who currently heads the board of directors at Dongfeng. The latter company will also provide the new player with a CEO, if rumors are to be believed.

Changan Chairman Zhu Huarong will not hold any management positions in the new conglomerate for the simple reason that he plans to step down this year. If the companies do merge, their combined vehicle sales will reach 4.58 million units per year, overtaking China’s leading BYD and becoming the seventh-largest automaker in the world. The consolidation will allow Dongfeng and Changan to optimize their supply chains and reduce component purchasing costs without compromising product quality.

China’s largest state-controlled automakers are FAW, Dongfeng and Changan. Compared to younger private companies like Li Auto, Nio and XPeng, they are quite conservative in developing their model range and technology, so the state wants to remove some regulatory barriers. The restructuring is likely to give Dongfeng and Changan a better chance of survival in the increasingly competitive Chinese auto market.

By the way, according to the results of last year, the only Chinese automaker in the top ten leaders of the world market was BYD, which was content with ninth place, Nissan, as part of the alliance with Renault, occupied fourth, and Honda was limited to seventh. From this point of view, the potentially merged Dongfeng and Changan are aiming for seventh place, behind General Motors and Stellantis with their 5.96 and 5.32 million cars sold last year, respectively.