GAC in deal to buy FAW stake in JV

A proposed deal between two of China's major carmakers has put the spotlight on a new round of consolidation, as intensifying competition and the shift toward smart new energy vehicles put greater pressure on companies to improve efficiency.

Guangzhou Automobile Group (GAC) announced on Monday that it had signed an agreement of intent with China First Automobile Group (FAW) to acquire part of the latter's stake in a vehicle manufacturing joint venture through a share issuance and capital raising.

If completed, FAW would become GAC's second-largest shareholder. Details of the joint venture, transaction value and shareholding ratio have yet to be disclosed.

Citing sources, Economic Daily reported that FAW Toyota could be the asset involved, reviving discussion about a possible restructuring of FAW Toyota and GAC Toyota.

Toyota did not respond to a China Daily query by press time on whether the deal was initiated by the Japanese automaker.

Last year, Toyota started a pilot scheme in some smaller Chinese cities under which dealerships sell and service models from both of its joint ventures, saying showroom traffic was not enough for the two to run separate dealerships.

Toyota's sales in China slumped 19 percent to 920,000 units in the first eight months of this year, while its production capacity in the country stood at around 1.3 million units, according to news portal Guancha.

For decades, maintaining two or more joint ventures allowed international automakers to expand production capacity, broaden distribution networks and cover China's rapidly growing auto market.

But confronted with mounting pressure from local Chinese carmakers including BYD and Geely in the past three to five years, they are seeking ways to stay agile by preventing overlapping production and sales cannibalization.

Mazda unified its two joint ventures with FAW and Changan in 2021. Last year, Ford established a unified sales network in China.

Caijing reported that Audi is adjusting the business operations of FAW Audi and SAIC Audi to seek greater differentiation for the next stage of competition in China.

The next chapter of foreign automakers' China strategies may depend more on building efficient partnerships, clearer organizational structures and deeper integration with China's evolving automotive ecosystem, analysts said.

The development comes as policymakers are charting a clearer path for China's auto industry, where intense competition has squeezed profitability. The industry's average profit margin stood at just 1.5 percent in the first half of this year, a 10-year low, said the China Association of Automobile Manufacturers.

On average, a carmaker earns around 3,000 yuan ($447) by selling a 200,000-yuan car, said Zhang Yongwei, president of Beijing-based industry think tank China EV100.

A development plan for the 2026-30 period released last week called for greater efforts to promote mergers and restructuring among automakers, cross-regional integration and the development of global automakers in China.

Shao Ji, deputy director-general of the Industrial Development Department at the National Development and Reform Commission, said the commission supports management reforms by large corporate groups as well as mergers and restructuring among companies through market-oriented and law-based approaches.

Closer cooperation or even consolidation is not rare in the car industry. Nissan and Honda explored a merger in late 2024 but gave up the plan in 2025. Last month, the two announced plans to work together to develop standardized electronic control units for their next-generation software-defined vehicles.

lifusheng@chinadaily.com.cn