GAC Group has signed a letter of intent with China FAW to acquire part of FAW's stake in a vehicle joint venture through a share issuance, according to an announcement on September 14. The deal would make FAW the second-largest and strategically influential shareholder of GAC, the company said.
The announcement did not name the joint venture, but industry speculation points to FAW Toyota. GAC and FAW both operate separate Toyota joint ventures - GAC Toyota and FAW Toyota - and the move is widely seen as a precursor to consolidating what is known as the 'north-south Toyota' structure in China, according to Chinese business outlet Huxiu.
Under the proposed transaction, GAC would issue new A-shares to purchase roughly 25% of FAW Toyota from FAW, valued at around 20 billion yuan (about $2.82 billion), based on market estimates. The issuance price is estimated near 4.7 yuan per share, requiring about 4.255 billion new shares. After the deal, FAW would hold approximately 29.44% of GAC, while Guangzhou Automobile Industry Group's stake would drop from about 54.02% to around 38.1%, keeping its controlling position.
Consolidation amid sales slump
The move comes as Toyota's China sales decline. In the first half of 2026, Toyota sold 694,700 vehicles in China, down 17.1% year-on-year, the first half-year drop in two years. FAW Toyota's retail sales fell 27.4% to 273,700 units, while GAC Toyota dropped 6.3% to 341,100 units. The Corolla, a long-standing bestseller, saw sales fall 35.5% to 31,400 units.
GAC has been hit hard by the downturn. Its annual sales fell from 2.505 million units in 2023 to 1.7215 million in 2025, and the company posted its first annual net loss of 8.784 billion yuan (about $1.24 billion) in 2025. The two separate Toyota sales networks and overlapping product lines have created internal competition and duplicated costs, industry observers note.
The restructuring follows a September 11 policy statement from China's Ministry of Industry and Information Technology and eight other departments, which called for greater merger and consolidation among automakers. The National Development and Reform Commission also voiced support for large enterprise groups to pursue market-based consolidation to reduce homogeneous competition.
End of an era for 'sister cars'
For decades, Toyota split global models into 'sister cars' for its two China joint ventures - such as the Corolla at FAW Toyota and the Levin at GAC Toyota - to maximise market coverage. But as the market shifts to intense price competition, this approach has become a source of internal friction, with dealers noting that price wars often pit the two ventures against each other on similar models.
Reports suggest a merged Toyota China sales company could be formed, with Toyota holding 50%, and FAW and GAC each holding 25%. If completed, it would end the 'north-south Toyota' structure that has existed for about 30 years.
For FAW, the deal offers access to GAC's scale and experience in the passenger vehicle market, as its own new-energy vehicle business accounts for only about 13.5% of output. The transaction is expected to constitute a major asset restructuring and related-party transaction, with GAC's A-shares suspended for up to 10 trading days.
