Dongfeng Capital restructuring completed

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Author | Zhou Zhiyu

On March 9, Dongfeng Group Co.'s shareholders’ meeting overwhelmingly approved the privatization plan and the proposal for Lantu Automobile to be listed on the Hong Kong Stock Exchange. This "privatization + high-quality new energy asset spin-off listing" capital operation has officially moved from planning to implementation.

The overwhelming approval is not unexpected; the significance of this transaction lies not in Dongfeng Motor’s individual progress, but in the fact that it is the first to tackle the structural dilemma faced by central state-owned auto companies in the Hong Kong stock market.

The background to this transaction is that the Hong Kong market’s capitalization function for traditional central state-owned auto enterprises has nearly failed. Dongfeng Group Co.'s price-to-book ratio has long hovered at low levels, with both internal combustion and new energy businesses mixed together, causing fast-growing segments to be dragged into the same valuation framework by low-value businesses. The Hong Kong shell is not an asset, but a liability.

Dongfeng Motor’s solution is to make a clean cut: privatize and delist the parent company, achieving 100% state ownership, shortening the governance chain and focusing strategically on the new energy business; then separately push Lantu to the Hong Kong market, giving it an independent valuation anchor and financing channel. The parent company subtracts, the subsidiary multiplies, each in its own place.

Minority shareholders voted overwhelmingly in favor because the math makes sense. Continuing to hold a financing-impaired, chronically undervalued comprehensive platform is less attractive than accepting the proposal and betting on post-split value realization.

Lantu’s operating data provides backing: from 2023 to 2025, sales will rise from 50,000 units to 150,000 units, with a compound annual growth rate of 73%; revenue will go from 12.75 billion yuan to 34.86 billion yuan; net profit in 2025 will reach 1.02 billion yuan, with a gross margin of 20.9%, already crossing the break-even point. This is no longer a cash-burning incubation project, but an independent asset capable of generating its own profit. The basic logic for shareholders voting ‘yes’ is simple: this asset deserves an independent valuation.

The real significance of Dongfeng Motor’s transaction is that it has paved a way for central state-owned auto enterprises.

State-owned enterprise reform has been called for years; the core dilemma has always been: how to achieve market-driven efficiency for new energy businesses without loosening state ownership control? Dongfeng Motor’s plan separates these two issues—100% state ownership solves governance, independent spin-off listing solves efficiency. The two targets no longer compromise with each other; instead, each has its own path to realization.

According to people close to Dongfeng Motor, this year the company will continue to deepen the "One Dongfeng" strategy, enabling synergy among brands. In addition, frontline business units are granted greater autonomy, allowing each brand to make decisions more flexibly and act faster.

In the view of those aforementioned insiders, this mechanism change will serve as a crucial guarantee for Dongfeng Motor to win this transformation battle.

Of course, this plan cannot be copied by everyone. It has prerequisites: the parent company’s overall transition must have a solid foundation. Dongfeng Motor’s new energy sales will exceed one million units by 2025, with the proportion of self-owned brands surpassing 60%. Without these hard targets as support, capital-level moves are just spinning wheels.

On March 19, Lantu will be listed on the Hong Kong Stock Exchange as the "first high-end new energy share of central state-owned enterprises." For Dongfeng Motor, this marks the final act in capital structure reshaping; for the industry, central state-owned enterprise new energy moves from "internal incubation" to "capital independence," and Dongfeng Motor fired the first shot.

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