Dongfeng Motor stock surged by almost 85.8% on Monday. The state-owned Chinese automaker Dongfeng Motor announcement that its parent is planning a restructuring with another government enterprise. This peculation increased the speculation of a possible merger resulting in rise in stock.
Zhang Yuzhuo, Director of the State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC), in March of 2024 acknowledged that Chinese automakers lag behind competitors in the new energy vehicle (NEV) sector. It has since introduced separate performance evaluations for three central automotive state-owned enterprises, focusing on technology, market share, and future development.
Dongfeng Motor restructuring
Announcing on Sunday, Dongfeng Motor said that the restructuring by its parent, Dongfeng Motor Corporation, can increase the possibility of a change in the controlling shareholder structure. However, they also stated that it would “not result in a change to the actual controller”.
The reason for restructuring is optimize industrial layouts, improve operational efficiency, and strengthen resource allocation, that can help in increasing the competitiveness of state-owned automakers in the ever-evolving auto market.
China automaker merger
Similarly like Dongfeng, Changan Auto is also owned by the central government, published an identical statement about a restructuring plan by its parent on Sunday. This statement raised the speculation on Chinese social media about a possible merger between two China that the two automaker’s merger.
China’s focus on independency
China’s automakers till now have been dependent on the foreign companies to improve it’s sales and profit. The Chinese automakers had to have joint ventures with global brands such as Volkswagen, Toyota, and General Motors, to provide strong sales, they also limited the growth of independent brands. However, as China is aiming to dominate the electric vehicle (EV) market, the government has been encouraging companies to focus on independent technology, innovation and competitiveness.
China’s dominance in EV market
Foreign automakers have lost market share to Chinese automakers like BYD in the past three years. The reason for the loss is inability to roll out EVs on time in the world’s biggest competitive auto market. BYD has become the fifth largest automaker globally in 2024. The annual sales of BYD easily surpassed General Motors, Honda and Ford.
Dongfeng is the Chinese joint venture partner of Nissan and Honda. It sold 1.54 million passenger vehicles in 2024. There was a fall of about 11.5% from 2023. Other than Dongfeng and Changan, the Chinese central government owns FAW though this is not listed.
Stock update
Following the speculation of a possible merger Dongfeng stock jumped to HK$6, it’s highest since July 2022, shortly after it opened. The shares in Changan Auto climbed 4.8% in Shenzhen.
