FAW Group and GAC Group are finalizing a major equity deal that could see the central state-owned automaker invest about 20 billion yuan (about $2.8 billion) to become the second-largest shareholder of GAC. The transaction, announced by GAC on September 14, involves GAC issuing new shares to purchase part of a joint-venture vehicle company held by FAW, according to Chinese business outlet Huxiu.
Under the plan, FAW will exchange some of its joint-venture interests for a strategic stake in GAC, which will remain under the control of its current majority shareholder, Guangzhou state capital. Based on GAC's total share capital of about 10.197 billion shares and a hypothetical issue price of 5.09 yuan per share, a 30% stake would be worth about 22.24 billion yuan (about $3.13 billion). Market speculation suggests GAC may acquire about 25% of FAW Toyota, with the deal priced around 20 billion yuan.
Why the deal matters
GAC has been under financial strain, posting a net loss of about 8.78 billion yuan in 2025 and a further loss of 4.47 billion yuan in the first half of this year. The injection of FAW Toyota's profitable operations—FAW Toyota reported a net profit of about 4.66 billion yuan in 2024—could provide much-needed support. GAC will pay for the stake with new shares, avoiding a cash outlay, while gaining investment income and future dividends.
For FAW, the deal offers access to GAC's expertise in new-energy vehicle development, including battery systems and intelligent cockpits, as it accelerates its electrification transition. FAW's joint-venture brands still account for over 70% of its sales, while its self-branded NEV sales grew 71.4% year-on-year in 2025. The partnership is seen as a flexible alternative to a full merger, which industry experts say would be difficult to execute given the complex interests involved.
Synergies and challenges
The two groups each operate a Toyota joint venture—FAW Toyota and GAC Toyota—which provides a natural starting point for cooperation. Toyota is reportedly pushing for a joint sales company, with Toyota, FAW, and GAC holding 50%, 25%, and 25% stakes respectively, to streamline distribution and reduce internal competition between sister models like the Corolla and Levin.
Beyond passenger cars, commercial vehicles, regional market complementarity, and joint procurement are potential areas for collaboration. However, challenges remain, including coordinating the interests of two state-owned systems, integrating corporate cultures, and the practical difficulties of changing suppliers. The deal also aligns with Chinese government policies encouraging consolidation in the auto industry, as outlined in the 15th Five-Year Plan for intelligent connected NEVs.
