After nearly four months of negotiations, China has officially shelved a proposed merger between two of its major state-owned automakers—Dongfeng Motor Corporation and Changan Automobile. Instead, a new state-owned automotive enterprise is set to be established, signaling a shift in the country’s approach to industry consolidation.
On June 5, Changan Automobile said in a regulatory filing that its indirect parent, China South Industries Group Corporation, had received approval from the State Council to spin off its automotive operations into a separate central state-owned enterprise (SOE). The newly created entity will be overseen directly by the State-owned Assets Supervision and Administration Commission (SASAC). The restructuring does not alter Changan’s ultimate ownership, the company said.
Dongfeng Motor, in a separate statement, confirmed that its indirect parent company is not involved in any asset or business restructuring at this time and that its operations remain unaffected.
The announcements mark the formal end of a widely anticipated merger that could have reshaped China’s automotive landscape. If completed, the combined group would have had annual vehicle sales exceeding 5 million units—ranking among the top five global automakers. That ambition, at least for now, has been put on hold.
The restructuring attempt unfolded against the backdrop of Beijing’s broader push for SOE consolidation. Since 2023, SASAC has emphasized a focus on core businesses, citing the fragmented and inefficient state of China’s state-owned auto sector, particularly in the race toward new energy vehicles (NEVs). Merging Dongfeng and Changan was seen as part of this strategic realignment.
In February, both companies disclosed that their parent groups were in preliminary discussions about restructuring with other central SOEs. Though no specific target was named, multiple media outlets speculated the merger was likely between Dongfeng and Changan, two of China’s most prominent state-backed automakers.
Changan Chairman Zhu Huarong publicly supported the merger on several occasions. In an April earnings call, he said a strategic restructuring plan with Dongfeng was “basically finalized,” and in May reaffirmed the plan was “progressing in an orderly manner.” He also noted that the merger would bring long-term development opportunities for Changan.
But according to Chinese financial media, the deal proved too complex to execute. The scale of the merger, combined with governance challenges and possible friction over control and resource allocation, contributed to its demise. Observers noted that Dongfeng had remained notably silent throughout the process, while Changan made multiple public statements—a dynamic some analysts interpreted as an imbalance in enthusiasm or strategic gains.
Ultimately, the restructuring plan took a different route. The spin-off of South Industries Group’s automotive unit into a new SOE now appears to be the government’s preferred path forward. If finalized, it would mark the emergence of a fourth centrally managed automotive SOE, alongside FAW Group, Dongfeng Motor, and SAIC Motor.
Market reactions reflected this divergence in outcomes: shares of Dongfeng Motor plunged over 13% in Hong Kong trading on Thursday, while Changan’s stock rose 1.59%.
Although the proposed Dongfeng-Changan merger has been shelved, Beijing’s intent to reshape the state-owned auto sector remains unchanged. This aborted merger may prove to be only a first move in a broader game of strategic realignment.