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Carmakers FAW, Dongfeng, Changan move closer to merging

Chinese state-owned trio sign a pact to team on tech development, overseas expansion

An auto show held in Guangzhou in November 2016. Dongfeng will cooperate with FAW and Changan to develop new technologies.

BEIJING -- Three major Chinese state-owned automakers signed a strategic partnership agreement on Friday, a move seen as another step toward an eventual merger.

FAW Group, Dongfeng Motor and Chongqing Changan Automobile will collaborate on four areas: developing technologies like electric vehicles and autonomous driving; manufacturing cars and procuring parts; expanding overseas; and devising sales methods for the sharing economy. Working together, they seek to make Chinese-brand vehicles more competitive in the global arena.

The accord was signed by FAW Group Chairman Xu Liuping, Dongfeng Motor Chairman Zhu Yanfeng, and Changan Automobile parent China South Industries Group's chairman, Xu Ping, in Dongfeng's hometown of Wuhan, Hubei Province.

The trio have traded management executives recently, and with this partnership appear to be moving closer to a goal of fully integrating. Before becoming chairman of China South Industries in August, Xu Ping held that position at FAW from 2015, and before that chaired Dongfeng. FAW and Dongfeng linked hands in February on advancing technologies such as autonomous driving.

New-car sales in China, the world's biggest market, are expected to reach nearly 30 million units in 2017. But the top sellers are overseas players such as Volkswagen of Germany, General Motors of the U.S. and several Japanese makers. The three partnering Chinese companies combined sell fewer than 4 million cars per year, most of that at home.

China is moving toward loosening regulations on foreign ownership of auto ventures. Under those circumstances, Beijing seeks to "build up powerful state-owned makers of Chinese-brand cars, and these three companies are central" to that effort, said one auto industry analyst.

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