(Yicai) June 5 -- Shares in Changan Automobile advanced today after the Chinese vehicle manufacturer said that it will be spun off from its parent company China South Industries Group to become a standalone central state-owned enterprise, putting an end to long-standing rumors of a potential merger with Dongfeng Motor.

Changan’s share price [SHE:000625] closed up 3.3 percent at CNY12.98 (USD1.81). Earlier in the day it jumped 5.7 percent to CNY13.28.

The firm's affiliated subsidiaries also saw a share surge. Dongan Auto Engine’s stock [SHA:600178] soared by the daily trading limit of 10 percent to hit CNY13.57 (USD1.90), Huaqiang High-tech’s shares [SHA:688151] jumped 13.3 percent to end at CNY19.15, while Great Wall Military Industry [SHA:601606] climbed 5.1 percent to finish at CNY14.17.

Changan’s auto business will be calved off into an independent central enterprise, the firm said today, citing a notice that China South Industries received from the State-owned Assets Supervision and Administration Commission, which is under the State Council. The move has received approval from the State Council.

The firm’s day-to-day operations will not be affected, Chongqing-based Changan said. Several of its listed subsidiaries also shared updates on the restructuring.

Dongfeng has been informed by its indirect parent company Dongfeng Motor Group that its assets and business will not be restructured for the time being, the Wuhan-based firm said the same day. The company’s operations remain normal and its listed subsidiaries made similar announcements.

Dongfeng’s share price [SHA:600006] closed down 6.8 percent at CNY7.39 (USD1) and its unit Dongfeng Electronic Technology’s stock [SHA:600081] plunged 6.7 percent to end the day at CNY13.85 (USD2).

Back in February, both Dongfeng and Changan said that their parent firms were in talks with other state-owned central enterprises about a potential restructuring. This fueled market speculation that the two companies might merge.

In terms of financials, Changan’s net profit plummeted 35.3 percent last year from a year earlier to CNY7.3 billion (USD1.02 billion), even though the company sold 2.6 million cars, the most in seven years. Revenue climbed 5.6 percent to CNY159.7 billion (USD22.2 billion).

Dongfeng, meanwhile, turned a net profit of CNY60 million (USD8.35 million) over the period, a big turnaround from a CNY3.8 billion loss the year before, while revenue jumped 6.9 percent to CNY106.1 billion (USD14.7 billion). However, car sales sank 9.2 percent to 1.8 million autos.

Other automakers are also reorganizing internally. For instance, Geely Automobile recently merged its Zeekr and Lynk & Co. brands, and SAIC Motor and GAC Group are also restructuring and integrating brands.

State-owned auto manufacturers are likely to see more integration of their passenger car businesses, Ping An Securities said. Many of these companies are underperforming in the high-end smart electric car segment and lack economies of scale. Consolidating operations could reduce resource duplication, improve capacity utilization and enlarge their footprint in the smart EV market.

The number of central enterprises has halved to 98 since the State-owned Assets Supervision and Administration Commission was formed in 2023.

Editor: Kim Taylor