After a 10-day trading suspension, DONGFENG GROUP has announced a major capital market restructuring. The company recently revealed plans to push its subsidiary Landtu Automobile Technology Co., Ltd. (Landtu Motors) for an introduction listing on the Hong Kong Stock Exchange, while simultaneously privatizing DONGFENG GROUP.

A representative from Dongfeng Motor stated that the company plans to optimize resource allocation through this "introduction listing + privatization" approach. Industry observers view this "one out, one in" strategy by Dongfeng Motor, a key player in China's automotive "national team," as an effort to find new breakthrough opportunities on its transformation journey while promoting Landtu's public listing.

**One Out, One In**

The core elements of Dongfeng Motor's transaction include introduction listing and privatization.

Introduction listing is a method for already-issued securities to apply for listing, characterized by not issuing new shares or involving fundraising during the listing process, but merely allowing existing shareholders' securities to trade on the exchange. Privatization refers to acquisition activities initiated by major shareholders of listed companies, buying back all shares from minority shareholders to transform from a public to a private company.

According to the announcement, this transaction adopts a combined model of "equity distribution + absorption merger," with two core elements serving as mutual prerequisites and advancing simultaneously. The transaction consists of two stages: First, DONGFENG GROUP will distribute its 79.67% stake in Landtu Motors to all shareholders according to their shareholding proportions and share categories, followed by Landtu Motors' introduction listing on the Hong Kong Stock Exchange. Second, Dongfeng Motor Group (Wuhan) Investment Co., Ltd., a wholly-owned domestic subsidiary of Dongfeng Motor, will act as the "absorbing entity," paying equity consideration to DONGFENG GROUP's controlling shareholder Dongfeng Motor and cash consideration to other minority shareholders to achieve 100% control of DONGFENG GROUP.

According to relevant materials, DONGFENG GROUP, serving as Dongfeng Motor's Hong Kong-listed platform, was established in 2001 and listed on the Hong Kong Stock Exchange's main board in December 2005, operating for nearly 20 years. DONGFENG GROUP's main business covers passenger vehicle manufacturing and components, automotive finance, and other automotive industry chain-related businesses, serving as the core entity of Dongfeng Motor's operations. A Dongfeng Motor representative stated: "This transaction represents important exploration for state-owned enterprises' deepening reform and accelerated transformation, injecting new momentum for cultivating new productive forces in the automotive industry."

**Transformation Growing Pains**

After nearly 20 years of Hong Kong listing, why DONGFENG GROUP suddenly chose privatization has become a focal point of external attention.

Regarding DONGFENG GROUP's current situation, Dongfeng Motor explained: "Affected by automotive industry transformation pains and intensified market competition, DONGFENG GROUP's valuation has been relatively low in recent years, essentially losing its H-share listing platform's financing function." Facing challenges from industry transformation and fierce market competition, Dongfeng Motor chose to proactively seek change. Data shows that as of July 31 this year, DONGFENG GROUP's total market capitalization was HK$39.12 billion, with a closing price of HK$4.74 per share and a PB ratio of only 0.25 times.

From financial reports and sales data, DONGFENG GROUP's situation also appears challenging. Financial reports show that in the first half of this year, DONGFENG GROUP achieved revenue of 54.533 billion yuan, up 6.6% year-on-year, with net profit attributable to listed company shareholders of only 55 million yuan. Previously, DONGFENG GROUP issued a profit warning, stating that the main reasons for performance changes were the continued market downturn of joint venture non-luxury brands, leading to significant declines in joint venture passenger car business sales and profits. To address fierce market competition, the company increased investments in R&D, brand building, channel development, and marketing in its independent business sector.

Under market competition pressure, Dongfeng Motor is actively adjusting. Previously, Dongfeng Motor launched multiple automotive brands focusing on new energy vehicles, including Mengshi, Dongfeng Aeolus, and Dongfeng Nano. However, this year Dongfeng Motor began brand consolidation and integration. In June, Aeolus Technology was established, integrating the entire value chain of R&D, production, supply chain, sales, and services for three independent brands—Dongfeng Fengshen, Dongfeng Nano, and Dongfeng Aeolus—under one entity. Aeolus Technology General Manager Wang Junjun stated: "Previously, our R&D, production, supply, sales, and service systems were scattered across different companies. This structure inherently caused information transmission deviations and low decision-making efficiency. This isn't simply brand merging, but closed-loop management of the entire R&D-production-supply-sales-service value chain. After integration, Aeolus and Nano brands will merge into Dongfeng Aeolus, while the Fengshen brand will be retained separately."

"This privatization can help Dongfeng Motor's further development," said Cui Dongshu, Secretary General of the China Passenger Car Association. He believes Dongfeng Motor is striving for comprehensive transformation and internal adjustments, and choosing privatization benefits Dongfeng Motor's strategic planning and adjustments while avoiding external interference.

**Landtu "Flying Solo"**

Compared to DONGFENG GROUP's low valuation, Landtu Motors, the high-end new energy brand created by Dongfeng Motor, is becoming a "potential stock" within Dongfeng Motor's portfolio. Therefore, as the automotive industry enters the deep waters of transformation, behind DONGFENG GROUP's privatization, Dongfeng Motor aims to accelerate Landtu Motors' listing process. Dongfeng Motor describes this restructuring method as "making room for better opportunities."

As early as 2021, Landtu Motors began planning its IPO. In 2021, Landtu Motors CEO Lu Fang first announced that Landtu would establish an independent legal entity, launch an employee stock ownership plan, and explicitly stated intentions to "extensively utilize capital market platforms." Subsequently, Landtu Motors' IPO progress has attracted significant attention.

In July this year, DONGFENG GROUP and Dongfeng Asset Management made capital injections into Landtu Motors, with Dongfeng Asset Management contributing 1 billion yuan to subscribe for approximately 94.97 million yuan in registered capital. After the capital increase, DONGFENG GROUP, Dongfeng Asset Management, and other shareholders will hold approximately 79.69%, 3.3%, and 17.01% of Landtu Motors' equity, respectively. Regarding the capital increase reasons, DONGFENG GROUP stated that Landtu Motors needs to increase investment to enhance its R&D, brand, and marketing capabilities.

"After Landtu Motors' independent listing, it will participate in global competition with clearer positioning, leveraging capital market resource allocation functions to accelerate core technology R&D and overseas business expansion, consolidating advantages in the high-end new energy market and growing into a 'new force' competing on the same stage as international high-end brands," said a Dongfeng Motor representative. This transaction will further promote value restructuring of Dongfeng Motor's brand matrix.

In fact, Landtu Motors is becoming Dongfeng Motor's new "engine." In 2020, Dongfeng Motor launched the Landtu brand. According to the official website, Landtu Motors currently offers four vehicle models: Landtu FREE, Landtu Dreamer, Landtu Zhiyin, and Landtu Zhuiguang. Data shows that Landtu Motors delivered 85,000 vehicles last year, up approximately 70% year-on-year. Additionally, DONGFENG GROUP mentioned in its financial report that this year's passenger car business revenue growth mainly came from Landtu Motors, with gross margin growth attributed to both Landtu Motors and commercial vehicles.

Yan Jinghui, a member of the China Automobile Dealers Association Expert Committee, believes that after independent listing, Landtu Motors will have greater autonomy, benefiting its development and strategic adjustments, enabling more effective market operations. Facing market challenges, Landtu Motors also needs to prove its profitability and management capabilities to better adapt to market development.