In the backdrop of increasingly severe challenges within the automotive industry in China, the state-owned enterprise China FAW, originally the cradle of China’s automobile industry, is facing slow development and operational difficulties due to its lag in introducing high technology and updating. The Changchun city government recently issued a warning in the automotive industry development plan, stating that China FAW urgently needs to revamp itself, or it may face national strategic restructuring in the future.
According to Tencent News, on June 11th, the Changchun Industry and Information Technology Bureau released the “Changchun City Automotive Industry Development 15th Five-Year Plan (Draft for Comments)” as part of the city’s five-year development plan for the automotive industry.
The plan highlighted that against the backdrop of intensified market competition and strengthened government regulation of the automotive industry in recent years, China FAW’s sales have been declining. It might face pressure from strategic reorganization of the state-owned enterprise in the future.
The plan pointed out that China’s automotive industry has entered an era of stock competition. It is projected that by 2030, the number of domestic vehicle enterprise groups will reduce from the current 71 to around 15.
In this facing a reshuffle scenario, whether China FAW can survive has become a stark reality. Looking at China FAW’s production and sales in the past, its prospects are not optimistic.
Data shows that influenced by factors such as the transformation to new energy vehicles and price wars, China FAW’s production dropped from 3.727 million vehicles in 2020 to 3.307 million in 2025, a decrease of 420 thousand vehicles in five years.
In 2025, the average penetration rate of new energy vehicles in China’s market is 48.1%, while China FAW’s new energy vehicles only account for about 13.5% of the total production, and joint venture brand new energy vehicles make up just 2.6%, significantly lagging behind the national average level of the automotive industry.
The plan suggests that by 2030, the market share of joint venture brands may drop to below 30%, and indigenous brands will become the market mainstay.
Additionally, amid increasingly fierce market competition, Chinese joint venture car manufacturers are mostly opting for a China R&D and global sales model. However, China FAW still follows the old approach of overseas R&D and domestic sales, posing structural challenges.
In 2025, China FAW’s total vehicle sales were 3.302 million, of which joint venture brands accounted for 2.362 million, about 71.5% of the total sales. Its brands and profits are still dominated by joint venture products with Volkswagen and Toyota.
Meanwhile, in 2025, China FAW’s profit margin also decreased to 4.1%, lower than the average industrial profit rate in China.
Therefore, the plan suggests that if China FAW continues on its current path, it not only risks being eliminated from the market but also potentially being included in national-level state-owned enterprise restructuring and resource integration efforts. So far, the State-owned Assets Supervision and Administration Commission of China has led several state-owned enterprise mergers, such as CSR and CNR, Baosteel and Wuhan Iron and Steel.
Veteran media figure Mike Li told Dajiyuan that it was surprising for the Changchun city government to proactively propose that “if the transformation to new energy fails, it may be forced into a state-owned enterprise integration.” China FAW is not under the jurisdiction of Changchun city, but the city has issued such a plan, seeming to overstep its bounds.
However, China FAW and Changchun city are closely intertwined in terms of finance, employment, investment attraction, land use, and have long been economically integrated. As such, for Changchun city, planning for China FAW’s future is necessary in light of its own interests.
China FAW, also known as China FAW Group Corporation, is directly under the State Council of China (State-owned Assets Supervision and Administration Commission), a central enterprise, and a super-large state-owned enterprise.
Established in 1953, China FAW is a representative industrial enterprise in Changchun and even in Northeast China. Its traditional automobile brands include Hongqi, Jiefang, and Besturn, and later, it introduced joint venture brands with international companies like Volkswagen and Toyota.
Although China FAW is a central state-owned enterprise not under the jurisdiction of Changchun city, its importance to the city cannot be understated. It is the city’s largest industrial pillar, contributing about 70% of the city’s industrial output value and playing a vital role in the city’s economy, providing hundreds of thousands of job opportunities and supporting a large automotive parts industry chain.
Mike commented, “As one of the three major central state-owned enterprises in the automotive industry, directly overseen by the State-owned Assets Supervision and Administration Commission of China, and Changchun known as the ‘Automobile City,’ China FAW not only supports Changchun city but also accounts for nearly one-third of GDP in Jilin province, making its importance equivalent to Hangzhou’s Alibaba and Shenzhen’s Huawei.”
The three central state-owned vehicle enterprises directly managed by the SASAC are FAW, Dongfeng, and Changan.
In 2025, Dongfeng sold approximately 570,000 units of self-owned new energy vehicles, while Changan reached 1.109 million units, but China FAW only had 366,000 units, with the slowest pace of transformation to new energy.
“China FAW’s share of new energy vehicles is significantly lower than the market average, especially as the transformation speed of joint venture systems is slow,” Mike said, “With new players and technology car companies like BYD, NIO, XPeng, Huawei, and Xiaomi rapidly expanding, traditional central state-owned car manufacturers are facing market share pressure.”
Facing many challenges, China FAW is trying to grow through acquisitions, such as signing an agreement with Leapmotor in March 2025, including Leapmotor’s sales volume in China FAW Group’s total sales.
Given the many challenges China FAW is facing, the Changchun city plan suggests that the old model of China FAW is no longer sustainable, and it fully supports the transformation and upgrading of whole vehicle companies. The plan encourages mergers, restructuring, and production capacity integration.
“If China FAW significantly falls behind in the development of new energy vehicles in the future, and sales continue to decline, it is entirely possible for other central state-owned car enterprises to swallow it,” Mike emphasized. Changchun’s introduction of the plan is in line with Xi Jinping’s call to expand and strengthen state-owned enterprises, fundamentally aiming to monopolize the market.
According to Xinhua News Agency, on June 11th, China’s Ministry of Industry and Information Technology and the State Administration for Market Regulation summoned and reminded automotive production enterprises suspected of engaging in irrational competition to strictly comply with the “Price Law” and other laws, regulations, and rules and strengthen price compliance construction to collectively maintain market order.
Automotive World’s analysis on June 12th indicated that from 2023 to 2025, price wars led to a loss of revenue for the automotive industry amounting to 471 billion RMB, with the average car price dropping from 217,000 RMB to 194,000 RMB, a decrease of 11%.
In the first quarter of 2026, the industry’s profit decreased by 18%, with the average profit margin dropping to 3.2%. For example, Xiaomi incurred a loss of around $5,600 for each car sold.
The crisis was caused by overcapacity. Chinese factories have an annual production capacity of 55.5 million vehicles, while domestic demand is around 23 million vehicles, resulting in an average capacity utilization rate of close to 50%.
As factories cannot afford the consequences of halting production and local governments are reluctant to accept the unemployment issues resulting from corporate integration, this crisis isn’t a failure of regulation but a result of policy trade-offs.
China’s overcapacity and deviation from normal market mechanisms in the automotive sector led to a price war in 2023, causing price fluctuations in the car market and severe industry turmoil that eventually evolved into a fierce industry survival of the fittest.
The price cuts of some entry-level car models vary from 20,000 RMB to 160,000 RMB. Moreover, this harsh turmoil not only affects car companies but also impacts upstream and downstream enterprises.
Mike mentioned, “The price war that began in 2023 was initially meant to stimulate consumer demand, making people feel ‘it’s a loss if you don’t buy now.’ However, unlike buying houses or stocks, buying cars is purely a consumption behavior, and people’s psychology is: the lower the price, the less likely they are to buy.”
“Low prices were originally intended to drive transactions, but as the market became saturated, the ‘price war’ intensified, companies drained their profits, fell into declining sales, and suffered severe losses.”