The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) officially announced that it would implement a strategic reorganization of the three state-owned automotive enterprises—FAW Group, Dongfeng Motor, and Changan Automobile. The goal is to “build a world-class automotive group with global competitiveness, independent core technologies, and the ability to lead the transformation of intelligent and connected vehicles.”
The combined annual production capacity of the three central state-owned enterprises exceeds 8 million vehicles, yet the market share of their owned brands is less than 15%. The fragmented R&D investment has led to low efficiency in technological advances. After the reorganization, technological synergy will become a core focus. For example, a joint innovation consortium will be established in 28 “chokepoint” areas, such as automotive-grade chips and domain controllers, to concentrate resources on overcoming technological barriers.
Data from 2024 shows that the overseas sales of the three automakers reached 536,000 vehicles, but the overlap rate of their overseas networks is as high as 70%. After the reorganization, the 17 overseas KD (knock-down) factories in regions such as ASEAN and Central and Eastern Europe will be integrated to form an overseas expansion matrix with “one base and one main force.” It is expected that the cost of overseas market development can be reduced by 55%.
Source: AMT Read The Article
PSR Analysis. The three central state-owned enterprises have made substantial investments in the new energy vehicle (NEV) sector. Although their investment in NEVs is significant, the rate of converting these investments into actual results is not high. This undoubtedly highlights the problems of redundant investment and inefficient competition. Faced with the dual dilemmas of intense domestic competition and global technological competition, strategic reorganization has emerged as a possible solution. Moreover, after the reorganization, the new entity is expected to rank among the top three in global automotive sales. Leveraging economies of scale, it hopes to gain overwhelming advantages in R&D investment and supply chain bargaining power, which could accelerate the transformation of China’s automotive industry to new energy and intelligent vehicles.
This cooperation will involve a comprehensive integration across the entire industry chain, including intelligent driving, battery technology, and hydrogen energy. It will also cover the consolidation of technology platforms, supply chains, and overseas channels. This move could put an end to the internal resource waste caused by “redundant R&D” and focus resources on tackling forward-looking technologies such as chips and high-level intelligent driving.
After the merger, resources will be further tilted towards self-owned brands, and joint-venture automakers may accelerate their exit from the Chinese market. Meanwhile, private enterprises such as BYD and Geely will likely face certain impacts. With the financial and policy support from the central state-owned enterprises, the new group may take the initiative in price wars. Thanks to economies of scale, the cost per vehicle is expected to decrease by 10% to 15%, making consumers the biggest winners. PSR
Jack Hao is Senior Research Manager – China for Power Systems Research
