In the 156th batch of vehicle manufacturer and product admission catalogs recently released by the National Development and Reform Commission (NDRC), 17 sedan brands and 39 new car models were granted "Enrollment Cards." Among them, Hafei Motors stood out with a total of six models, making it the largest company on the list. This development marks a significant step for Hafei in gaining official recognition in the Chinese automotive industry.
On November 28, 2007, Dongfeng Motor issued a 2.1 billion yuan one-year short-term financing bill, signaling its financial strategy for growth. Shortly after, Dongfeng entered into an agreement with AviChina to acquire Hafei Motors. However, this deal did not include Changhe Automotive, another subsidiary under AVIC, leading to the temporary suspension of the full acquisition of CNAC's vehicle assets. The decision highlights the complex nature of corporate restructuring in China’s auto industry.
According to Dongfeng Motor’s board-approved development plan, the company aims to expand resources, enhance cost competitiveness, and drive innovation over the next five years. General Manager Zhu Fushou emphasized that while acquisitions are not ruled out, any major collaboration must be based on complementary strengths between the parties involved.
Dongfeng has long avoided acquiring Changhe Automotive, as the two companies have overlapping product lines and limited synergy. Despite AviChina's efforts to integrate Hafei and Changhe for mutual benefit, their product similarities made such integration difficult. If Dongfeng were to acquire both, it would face challenges in managing three mini-vehicle brands—Dongfeng Pan’an, Hafei, and Changhe—potentially creating internal competition.
Data from the China Association of Automobile Manufacturers shows that Changhe Automobile sold 89,049 units in the first half of 2007, a year-on-year decline of 11.4%. Its saloon sales dropped by 16.3%, and the company reported a net loss of 226 million yuan in 2006. In contrast, Hafei maintained strong sales, with over 200,000 units sold in the first 11 months of 2006. While Hafei has grown independently, Changhe has relied on Suzuki’s support.
At the recent 2008 Changhe Automotive Supplier Conference in Chengdu, Chairman Li Yao confirmed that Changhe will focus on small-displacement vehicles in the coming year. Meanwhile, Hafei continues to expand its range, including commercial vehicles. It also signed a letter of intent with PSA for commercial vehicle production, further diversifying its offerings.
Analysts believe that acquiring Hafei could provide Dongfeng with access to high-quality assets, particularly Dongan Power (600178). Dongan Power, which owns Dongan Mitsubishi, produces over 300,000 engines annually, powering numerous models like BYD F3 and Hafei Saibao. With Hafei’s acquisition, Dongfeng could build a stronger independent brand base in Harbin and strengthen its engine manufacturing capabilities.
In the first three quarters of this year, Dongfeng’s engine sales increased by 44.5% year-on-year, contributing significantly to the company’s profitability. The group’s parts and components cluster around joint ventures is becoming more prominent. Industry insiders suggest that future competition among China’s top automakers will increasingly revolve around their supply chains and independent brand strategies.
As a central state-owned enterprise under SASAC, Dongfeng’s negotiations with AVIC align with broader SOE restructuring trends. Government-led initiatives are shaping the industry, and Dongfeng’s growing influence over Hafei may help reshape the competitive landscape, enabling domestic brands to grow stronger.
Looking ahead, the merger with Hafei offers Dongfeng new opportunities in mini-vehicles, commercial vehicles, and its own brand development. Hafei’s Shenzhen base could help Dongfeng establish a coastal production hub, while its Harbin operations can support expansion in Northeast China.
The acquisition also opens the door for greater capital integration. Dongfeng may follow Shanghai Automotive’s model by purchasing Hafei’s entire vehicle business, from spare parts to complete vehicles, potentially leading to a full group listing. This strategic move could position Dongfeng as a more formidable player in the global automotive market.
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