The Global Automotive Industry Integration Storm Is Approaching. Who Will Stand Firm At The Forefront?

Feb 18, 2025

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Recently, news about the "merger and reorganization" of Dongfeng Motor and Changan Automobile has been all over the internet. The reason is that the two enterprises and their related listed companies simultaneously released a series of announcements on the 9th, stating that their indirect controlling shareholders are "planning a reorganization matter with other state-owned central enterprises". Dongfeng Motor, Changan Automobile and FAW Group are known as the three major central state-owned auto enterprises. Every once in a while, rumors about their "merger and reorganization" can be heard in the public opinion field. The truth of this time still needs new information disclosure from the relevant parties to become clear. However, it is an undeniable fact that the global automotive industry is undergoing a wave of consolidation.

 

Previously, in response to the rise of Tesla and Chinese auto companies, Honda and Nissan announced the start of integration negotiations, attempting to merge into the world's third-largest automaker. Although both sides recently stated that they would terminate the merger negotiations, it still indicates that in the face of the century's major changes in the global automotive industry, Japanese automakers are also seeking new breakthroughs through attempts at integration and reorganization. Considering that Nissan is already in a deep operational crisis, its integration and reorganization with potential third parties may not be far off.

 

The main force driving the global automotive industry consolidation is the technological revolution. Currently, the electric and intelligent industrial transformation triggered by the new round of technological revolution is not only redefining automotive products but also reshaping the competitive landscape of the automotive market. What is exciting is that in this disruptive process, China's automotive industry has firmly seized the strategic opportunities of change, achieved leapfrog development through innovation-driven strategies, and taken the lead in the global automotive industry's technological transformation. Including new forces, private auto companies have taken advantage of the mainstreaming of plug-in hybrid technology and the popularization of pure electric models to drive dramatic changes in the domestic and global automotive market competition patterns. Currently, BYD and Geely have entered the top 10 global auto sales rankings. It is expected that by 2030, more Chinese auto companies will appear on the top 10 global sales list.

 

In contrast to the rapid progress of private auto companies, the electric and intelligent transformation of some state-owned auto companies is lagging behind, and they urgently need to accelerate the pace of reform. If in the early years, the competitive advantage of state-owned auto companies relied more on establishing joint ventures with foreign brands and introducing and launching traditional fuel models favored by the market, this advantage no longer exists today. As the national team of the automotive industry, the central state-owned auto enterprises' realization of reform breakthroughs through resource integration is not only a strategic consideration but also has a sense of urgency in reality for implementing "concentration of state-owned capital in strategic emerging industries" and solving the problem of "insufficient development of new energy vehicles in state-owned enterprises".

 

The price war-triggered elimination competition is accelerating industry consolidation. According to incomplete statistics, there are currently over 70 auto companies in the Chinese market, with more than 120 passenger car brands produced and sold in China, and most of these companies have low monthly sales. In contrast, there are no more than 15 passenger car (or light vehicle) enterprise groups and no more than 40 brands in foreign markets. The number of Chinese auto companies and brands is still too large, and the market concentration needs to be improved. Of course, the two major markets of Europe and America also had hundreds of auto companies in history, and it was through the cruel process of survival of the fittest and industry consolidation that they achieved today's "survival of the fittest" and high market concentration. Objectively speaking, the history of global automotive industry development is not only a history of technological innovation but also a history of mergers and reorganizations.

 

The current public opinion discussions on the "merger and reorganization" of Dongfeng Motor and Changan Automobile mostly focus on the issue of "who will lead whom", and some even add the sales of the two central enterprises together to conclude that the new auto company will rise to become the world's fifth-largest auto group. Such "merger and reorganization" thinking and logic are somewhat simplistic or one-sided. The global automotive industry's history of mergers and reorganizations has long proved that scale is only a means, not an end. Only by transforming the "merger and reorganization" variable into an innovative driving force and achieving the effect of "1+1>2" can enterprises truly become leaders in the global automotive industry. This is also the key for us to remain clear-headed when the great wave of automotive industry consolidation comes.