By Jiahui Huang

Chinese auto giant Dongfeng Motor's shares have surged after it said it's planning a restructuring with another state-owned company, sparking expectations around a possible merger.

Shares of Dongfeng, a manufacturing partner of Chrysler parent Stellantis, rose 20% early on Monday in Hong Kong, putting them on track for the largest one-day gain in over four years. The stock climbed up to 3.87 Hong Kong dollars, or 50 U.S. cents.

Dongfeng's Shanghai-listed shares were up 10%, rising by the maximum daily limit.

The Wuhan, China-based company said in a filing late Sunday that it is planning a restructuring with another state-owned enterprise. Dongfeng said that while it may get a new controlling shareholder, that won't lead to a change in its "actual controller", a term referring to the person or entity with ultimate control over a company, which in the case of state-owned enterprises is often the government.

Separately, Chongqing Changan Automobile, another state-owned carmaker, released a nearly identical statement also stating plans to restructure.

Chongqing Changan shares were up 5.5% at 14.29 yuan, or US$1.96, around midday in Shenzhen trade.

The two statements have fueled speculation among investors of a potential merger between the two companies, which rank among China's "big four" state-run automakers, though no deal has been confirmed.

Changan Automobile and Dongfeng didn't immediately respond to requests for comment.

If a merger does occur, it could improve how the companies use their resources at a time when the Chinese auto industry is facing overcapacity issues, Bocom International analyst Angus Chan said.

Some analysts think the potential move could spark more market consolidation in the next two years in an industry that has seen intensifying competition, with carmakers slashing prices as they battle for demand in an increasingly crowded space.

CCB International analyst Qu Ke thinks a merger would align with the industry trend of optimizing resources and be positive for Changan Automobile and Dongfeng's profits. Longer term, this could also benefit the government's goals of boosting national tax income and employment, he said.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

February 09, 2025 22:57 ET (03:57 GMT)

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