In China's automotive industry's ascent to the global stage, there will inevitably be a single protagonist guiding the future.

The past week has been dominated by news of the Honda-Nissan merger, with the two Japanese automakers making one of the year's most significant announcements.

On December 23, Nissan and Honda officially announced the commencement of merger negotiations, aiming to transform their respective brands into subsidiaries of a new holding company through a joint venture, thus completing the merger. Additionally, Mitsubishi Motors, as a subsidiary of Nissan, could potentially join the merger.

Details regarding specific cooperation and societal attitudes have been previously discussed in BC's article titled "Merger Negotiations: Honda-Nissan Alliance Could Become the World's Third-Largest Automaker by Sales," and thus, will not be elaborated here.

The partnership between the two companies, whether seen as "huddling for warmth" or "a powerful alliance," is not universally favored. This counterintuitive move may align with the Japanese stubbornness often depicted in middle school comics.

The Survival Instinct of Japanese Companies

A detailed review of the past 30 years of global automotive mergers and acquisitions reveals that significant changes have occurred only in small waves.

Key milestones include Volkswagen acquiring Seat in 1986, Skoda in 1990, and Bentley and Bugatti in 1998. BMW acquired Rover Motors in 1994 but sold it due to poor performance in 2000. Ford acquired Volvo in 1999 and Land Rover from BMW in 2000. In 2005, Porsche acquired a stake in Volkswagen, and in 2007, Daimler and Chrysler ended their merger. In 2008, Tata Motors acquired Jaguar Land Rover from Ford, and in 2009, Volkswagen acquired a majority stake in Porsche's sports car business.

More recently, in 2010, Zhejiang Geely Holding Group acquired Volvo from Ford, and Renault-Nissan and Daimler cross-held stakes in each other. In 2012, Volkswagen fully acquired Porsche, and in 2014, Fiat strengthened its control over Chrysler by acquiring a significant stake. In 2016, Toyota acquired Daihatsu, and Nissan acquired a stake in Mitsubishi Motors. In 2018, Mazda and Toyota announced a joint venture, and Geely acquired a stake in Daimler Group.

The Asian financial crisis of 1998, the global financial crisis triggered by the U.S. subprime mortgage crisis in 2008, and the prolonged economic recession since 2018 have all played pivotal roles in shaping the automotive landscape. Mergers and acquisitions have become a crucial strategy for companies seeking survival amidst turbulent times.

Focusing on Japanese companies, they often find themselves at the mercy of global economic forces, with the yen serving as a conduit for exchange rate fluctuations. Renault's acquisition of Nissan in 1999 is a case in point, where Renault's acquisition of a substantial stake in Nissan at a favorable exchange rate directly contributed to a significant devaluation of Nissan.

While Harvard Business School heralds Renault's acquisition of Nissan as a successful merger, the Japanese view it as exploitation, leading to the eventual downfall of the Nissan-Renault alliance.

The Japanese government's arrest of Carlos Ghosn in 2019 further strained relations, intentionally separating Nissan from Renault to facilitate a potential merger with Honda. This reflects the Japanese mindset of protecting domestic industries and preferring internal mergers over foreign takeovers.

This insular mentality is evident in the global automotive industry, where Japanese companies have predominantly merged with other Japanese firms despite globalization. This narrow perspective, constrained by islands and clans, persists in the Japanese psyche.

While going it alone may not be sustainable, this approach is understandable given the need to protect domestic industries and ensure enterprise stability.

The Rise of China's Auto Industry with Chinese Characteristics

In 2023, following Wei Jianjun's call for introspection, a series of brand integrations commenced, consolidating six brands into similar categories. Similarly, Changan Automobile began merging its multiple brands and product lines, including Changan Aumax, UNI series, CS series, Yida, Yidong, and Lumin.

At the Chengdu Auto Show in September, SAIC Passenger Vehicles announced the integration of Roewe and Feifan's marketing systems. Subsequently, on October 28, SAIC announced that Roewe and Feifan would operate in tandem, with Feifan officially becoming part of SAIC Passenger Vehicles.

On September 20, at the "Shufu Public Course" at the Taizhou International Automobile Industry Expo, Geely Holding Group released the "Taizhou Declaration," marking a new phase of strategic transformation. Li Shufu stated that in response to market changes, Geely would abandon strategic expansion in favor of strategic integration, shutting down, merging, and transferring related businesses to focus on manufacturing and the automotive industry.

Subsequently, the Geometry series was integrated into the Yinhe brand, culminating in the historic merger announcement of Zeekr and Lynk & Co. on November 14.

Compared to internal brand integrations, the public is more eager to see mergers among large state-owned enterprises, hoping for a "one superpower and multiple strong players" scenario in China's auto industry, even if current leaders like BYD rank only eighth globally.

Rumors of a merger between the central enterprises FAW, Dongfeng, and Chang'an have persisted for a decade, often fueled by leadership changes and technical-product collaborations.

These rumors reflect societal expectations for a globally influential Chinese automotive group and the potential for another A-share market myth, akin to the merger of China Railway Rolling Stock Corporation and China North Railway Vehicles Group Corporation Limited.

From a top-level design perspective, the goals of state-owned enterprise rectification are twofold: to strengthen state-owned enterprises and ensure they do not lag in a competitive market, potentially necessitating reorganization to prevent asset depreciation.

In 2023, FAW and Dongfeng focused on personnel matters. On August 31, 2023, Qiu Xiandong officially became chairman after half a year of leading the company. Similarly, Yang Qing took over as chairman and secretary of the Dongfeng Motor Corporation party committee on October 27, following six months of acting in the role.

This leadership transition avoided the sensitive topic of mergers and reforms, opting for a more stable promotional path. For FAW and Dongfeng, a merger at this juncture could place them in an awkward position, potentially mocked as a "league of the weak" by foreign media.

However, unlike Nissan, FAW and Dongfeng do not face the same external economic pressures, making it sufficient to ensure they do not fall behind and their assets do not depreciate.

In the long run, mergers among central enterprises are inevitable. As state-owned enterprises, their fundamental goal is to serve national interests, transcending self-interest considerations.

In China's automotive journey to the global stage, there will undoubtedly be a singular protagonist guiding the future.

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