On the evening of September 14, GAC Group announced a trading halt and revealed that it had signed an intention agreement with FAW Group to acquire part of the equity in a joint-venture automaker held by FAW. The transaction, to be completed through a share issuance, would make FAW the second-largest and strategically influential shareholder of GAC. The announcement did not name the target, but market speculation quickly focused on FAW Toyota, according to PCauto.
A capital-level handshake, not a business merger
The deal is being read as a first step toward rationalizing Toyota's dual-joint-venture setup in China. For decades, Toyota has operated two separate partnerships: FAW Toyota in the north and GAC Toyota in the south. The two have produced sibling models such as the Corolla/Levin, RAV4/Wildlander, and Avalon/Camry, sharing platforms and parts to cover different regions. However, as the market shifts from growth to a stock competition, these twin models now compete against each other, and the duplication of R&D, supply chains, and dealer networks has become a burden.
According to PCauto, citing sources, the target is indeed FAW Toyota, but GAC will not acquire it entirely, and the sales company will not be included. The deal is more about aligning Chinese-side interests at the capital level before any business integration. FAW Toyota will remain jointly owned by FAW, GAC, and Toyota entities.
Consolidation amid falling profits
The move comes as China's auto industry faces severe profit pressure. According to the National Bureau of Statistics, revenue in the auto manufacturing sector grew only 1.8% year-on-year in the first half of 2026, while profits fell 19.5%. The industry's profit margin dropped to 3.8%, and for vehicle manufacturing alone, it was about 1.5%—the lowest in a decade. Several automakers, including GAC and Seres, have reported losses.
In response, Chinese authorities have encouraged consolidation. On September 11, nine government departments issued a plan for the 15th Five-Year Plan period, calling for increased merger and reorganization of automakers and the orderly exit of inefficient capacity. Private companies like Geely have already moved to streamline their brands, and state-owned enterprises are following suit. The FAW-GAC deal is seen as a precedent for cross-shareholding between central and local state-owned automakers.
For Toyota, the deal could pave the way for better coordination between its two Chinese ventures. GAC Toyota has been faster in electrification and smart features, using Momenta for driver assistance, Hesai for lidar, and Huawei for cockpit systems. FAW Toyota retains strong brand loyalty in northern markets. If the two entities eventually share platforms and channels, they could complement each other, though a full merger of the 1,400 dealers is unlikely in the short term. Toyota China has already piloted a "one city, one store" model in about ten cities, where both ventures' cars are sold in the same showroom.
The deal is still pending regulatory approval and the release of a restructuring plan. But the signal is clear: China's state-owned automakers are moving from expansion to consolidation, and the era of "more children, more fights" is ending.
