FAW, Dongfeng, Changan merger “hopeless” in short term

Shanghai (Gasgoo)- Zhu Huarong, president of Changan Auto recently said in an interview that Changan Auto has not received any notice about the regroup among Changan Auto, FAW Group and Dongfeng Motor. Besides, he thought the automakers' combination will not happen in the short term.

Zhu Yanfeng, chairman of Dongfeng Motor, showed that the planning of the cooperation with FAW Group and Changan Auto are still ongoing, according to the Bloomberg.

Last year, there had been persistent rumors that the three stated-owned automakers will merger. However, both the straightforward answer from Changan Auto's president and the vague reply from Dongfeng Motor's chairman convey the information that the combination business has not been put on agenda by any of three automakers.

Although Xu Liuping, chairman of FAW Group, has not delivered his attitude about the rumor, he expressed during the two sessions (the 13th NPC and the 13th CPPCC) that the group aims to foster its Hongqi to be “China's No.1” and “a world-famous” brand, which hints that Hongqi's brand promotion and FAW's reform are still the highlights for FAW Group this year.

Currently, the three state-owned automakers do have some cooperative projects. On March 9 this year, the FAW Group, Dongfeng Motor and Changan Auto signed the promotion and permission agreement at Dongfeng Motor's headquarters for their cooperation program in manufacturing industry and officially initiated the 6 cooperative projects of the first phase.

On December 1, 2017, the three automakers signed a framework agreement in Wuhan to comprehensively develop cooperation in four major fields including forward-looking technical innovation, auto whole chain operation, overseas business expansion and new commercial models.

On January 15, 2018, the technical or manufacturing departments from the three automakers signed a framework agreement on the cooperation in manufacturing area. According to this agreement, three parties co-built a promotional organization to develop their cooperation in manufacturing area and organized a team to execute the cooperation program.

These three automakers did nice cooperative works in manufacturing field. However, their cooperation in new energy, intelligent connection, AI and big data is more expected by the industry.

In February last year, FAW group and Dongfeng Motor announced to jointly set up a “forward-looking technology innovation center”. The framework agreement signed on December 1, 2017, also involves the forward-looking technical innovation. 

There are comments in industry that the three automakers have already lagged behind other state-owned automakers such as SAIC Motor, GAC Group and BAIC Group in such forward-looking technical areas as new energy and intelligent connection, etc. To some degree, the success of their cooperation depends on how much breakthroughs they can make in key technology areas, rather than the purchasing cost-saving or the manufacturing techniques’ improvement.