Changan Automobile has been upgraded to a central - state - owned enterprise, and its integration with Dongfeng Motor may be postponed.

On June 5th, Changan Automobile released an announcement stating that the automotive business under its indirect controlling shareholder, China South Industries Group, will be spun off into an independent central enterprise, with the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) performing the duties of the investor. Meanwhile, the military business under China South Industries Group will be merged into China North Industries Group. After the spin-off, Changan Automobile's indirect controlling shareholder will become the central enterprise spun off from the automotive business.

Previously, China South Industries Group indirectly controlled Changan Automobile through China Changan Automobile Group Co., Ltd., a wholly-owned subsidiary. China Changan Automobile Group Co., Ltd. holds approximately 21.56% of Changan Automobile's shares. Now, Changan Automobile has been upgraded from a company indirectly controlled by a central enterprise to a central enterprise itself, on par with FAW and Dongfeng.

On the same day, Dongfeng Motor also issued an announcement stating that the company is not currently involved in the relevant asset and business restructuring.

This is not difficult to understand. As both are central enterprises, any integration would inevitably involve numerous rounds of negotiation. Moreover, since the news of the integration between the two enterprises spread, both have obtained more resources. Not only has Changan Automobile been upgraded to a central enterprise, but Dongfeng has also received strong support from the Hubei provincial government. The governor of Hubei Province has even endorsed the cooperation between Dongfeng and Huawei. All these factors undoubtedly pose greater challenges to the integration.

The news of the potential integration between Changan and Dongfeng first emerged on February 9th this year. Both Changan Automobile and Dongfeng Motor issued announcements stating that their indirect controlling shareholders were planning restructuring matters with other state-owned central enterprise groups.

However, the integration of the two is not easy.

In addition to its traditional fuel vehicle business, Changan Automobile has three new energy brands under its umbrella: Qiyuan, Shenlan, and Avita. Qiyuan targets the low-end market, Shenlan aims to attract target customers in the mid-range market with its young, sporty, and technological brand image, and Avita combines the respective advantages of Huawei, CATL, and Changan, positioning itself in the high-end market.

The cumulative sales of these three new energy brands reached 735,000 units last year, representing a year-on-year increase of 52.8%. From January to May this year, the sales volume of Changan's new energy vehicles reached 350,900 units, a year-on-year increase of 46.89%. In May alone, the sales volume exceeded 94,800 units, a year-on-year increase of 70%. It can be seen that Changan's layout in the new energy vehicle business has begun to yield results.

Dongfeng's new energy business is mainly divided into two major segments. Voyah and Mengshi are its mid - to high - end brands, while Dongfeng Fengshen, Dongfeng Yipai, and Dongfeng Nano are new energy brands targeting the low - end market.

Last year, the sales volume of Dongfeng's new energy brands reached 860,000 units, achieving a year - on - year increase of 64.4%. From January to May this year, Dongfeng sold 299,000 new energy vehicles, a year - on - year increase of 118.1%.

Judging from the sales volume alone, both companies are accelerating their transformation towards new energy vehicles.

In terms of financial data, Changan Automobile's first - quarter financial report this year shows that the company achieved an operating income of 34.161 billion yuan in the first quarter, with a net profit attributable to the parent company of 1.353 billion yuan, a year - on - year increase of 16.81%.

Regarding the issue of losses in the new energy business, Changan also has a relatively clear profit plan. At the recently concluded Changan Automobile shareholders' meeting, Zhang Deyong, the chief accountant of Changan Automobile, said that Changan New Energy is expected to sell over 1 million vehicles this year, with a projected growth rate of over 36%. Through increased sales, it aims to approach the break - even point.

In addition, Changan Automobile launched a special cost - reduction campaign for new energy in 2024, the "Nirvana" campaign. The profitability of the company's new energy business has improved by 20% year - on - year, and the Shenlan brand achieved monthly break - even in 2024. Zhang Deyong said that with no reduction in investment, the break - even point for Shenlan Automobile is around 30,000 units per month, and it is hoped to achieve full break - even this year. Avita is also expected to reach the break - even point in 2026.

Dongfeng's financial data is also gradually recovering. Dongfeng Motor initially turned a profit last year. In the first quarter of this year, Dongfeng's operating income decreased by 20% year - on - year to 2.628 billion yuan, but its net profit attributable to the parent company increased by 7.92% year - on - year, reaching 151 million yuan.

During the downturn in the automotive market, integration is indeed a way to cope with the difficulties. However, the large - scale systems of central enterprises mean that their integration is often fraught with difficulties. Moreover, now that one has been upgraded to a central enterprise and the other has received more support from the local government, even if the integration between Changan and Dongfeng is not necessarily terminated, the challenges in the subsequent integration will surely increase significantly.