Chinese automakers are increasingly spinning off their powertrain divisions into independent companies that sell engines, transmissions, and electric drives to outside customers, a move that signals a fundamental shift in how the industry views its most closely guarded technology.
The latest development came on September 17, 2026, when FAW's wholly-owned powertrain subsidiary Qixin Power signed a letter of intent with Leapmotor, which plans to participate as a strategic investor in Qixin's Series A funding round. The two companies also agreed to collaborate on hybrid engines, electric drive systems, and range-extenders, according to Huxiu.
Qixin Power, established in June 2025, supplies not only FAW's Hongqi and Bestune brands but also external automakers and even drones and unmanned boats. The investment, though not yet finalized, goes beyond simple supply deals: it brings another automaker into the ownership structure and puts joint development into the partnership framework.
From internal cost to market commodity
This follows a wave of similar moves. In March 2026, GAC Group consolidated its hybrid engine and range-extender operations into a powertrain business unit, its first integrated component-level unit. Earlier, Geely and Renault formed a joint venture for powertrains, Dongfeng established Zhixin Technology, and BYD spun off its battery, motor, and electronic control businesses into the FinDreams group. Changan and Chery have also pushed for independent powertrain operations.
The common logic is to free powertrain departments from the role of guaranteed internal suppliers and make them compete for orders, control costs, and improve quality. Yan Bowen, Changan's hybrid powertrain platform director, told Auto Business Review that although Changan has not formally spun off its powertrain unit, it operates with similar internal settlement and external supply mechanisms.
This transformation is remarkable because in the traditional fuel-vehicle era, engines were a moat. Carmakers guarded them fiercely, and independent engine manufacturers were rare. Mitsubishi was an exception, supplying engines to many early Chinese brands. Mahle, a top supplier of pistons and cylinders, never sold complete engines. China's Dong'an Power, a rare independent engine maker, owed its existence to its military aviation heritage.
Why the moat is eroding
The shift is driven by electrification. As BEVs (battery-electric vehicles) rose, the engine lost its role as the decisive differentiator. With hybrid powertrains making a comeback, engines remain important but are no longer the sole competitive advantage. Meanwhile, the scale needed to sustain a full engine R&D and manufacturing system is becoming uneconomical for a single automaker.
Chen Gen, CTO of Dongfeng's Zhixin Technology, told Auto Business Review that powertrains have a relatively independent product form that can be transferred across vehicle platforms. Standardization of motor stator diameters and modular electronic control units allows one production line to serve both hybrid and electric drives, spreading investment costs and lowering per-unit costs for suppliers.
The economic pressure is intense. In 2025, BYD sold over 4.6 million new energy vehicles but earned only 32.6 billion yuan (about $4.6 billion) in net profit from vehicles, implying a per-vehicle profit of just 6,174 yuan (about $870). With price wars squeezing margins, automakers are looking for new revenue streams.
The trend is not without limits. The degree of platform standardization determines how far powertrain independence can go, and automakers still view powertrains as strategic reserves. But the movement from 'internal ration coupons' to 'market currency' is no longer an isolated case, reshaping the boundary between cost centers and profit centers in China's auto industry.
