Not long ago, the message from global carmakers was clear: the internal combustion engine was a relic of the past. A long list of legacy carmakers had declared their intention to go fully electric by 2030. But today, they are quietly changing course, extending the life of petrol-powered models well into the next decade.
That reflects the fact that globally the timing of an all-electric future looks uncertain. Electric vehicle sales growth is slowing, infrastructure gaps remain and, in countries such as the US, changing political dynamics hint at a regulatory rollback.
Yet China stands apart. The shift to EVs is not just a passing trend; it is turning into a structural transformation. Meanwhile, customer preferences are shifting from Japanese and European brands to those that are locally produced.
For the country’s legacy automakers, which relied on international partnerships for much of their oomph, an industry-wide overhaul looks inevitable.
One example of China’s shifting auto landscape is Dongfeng Motor Corporation, a state-owned carmaker and long-standing partner to Nissan, Honda and Peugeot-Citroën. Dongfeng has been expanding into EVs with its own line-up, but its greatest advantage has long been strong local demand for foreign-branded cars.
Now, its finances are beginning to reflect changing trends. Dongfeng sold 1.54mn passenger cars in 2024, down more than a tenth from the previous year. During this time, Chinese EV giant BYD sold more than 4mn cars, an increase of 40 per cent.
China’s auto industry, home to more than 100 carmakers, is vast yet deeply fragmented. Oversupply and a flood of unprofitable start-ups have created an unsustainably crowded market. As a result, investors have largely shunned the sector’s legacy carmakers, instead betting on newer, more innovative EV makers such as BYD and Xpeng.
But that could soon change. This week, Dongfeng and another state-controlled giant, Changan Auto, released nearly identical statements hinting at impending corporate restructuring. Shares of Dongfeng are up by about a third in the past week, on speculation that large-scale mergers are on the way.
There is good reason for the optimism. History provides a clear precedent: Beijing has regularly stepped in with policies to consolidate fragmented industries, from steel to telecom. That could be particularly helpful, too, to China’s most profitable EV makers, state-owned groups, such as SAIC Motor Corporation and Guangzhou Automobile Group, and private-sector giants such as Geely Auto Group and Great Wall Motors.
For investors who have long been sceptical of the sector, this shift could mark the beginning of a new chapter.
june.yoon@ft.com
