GAC Group said on September 14 that it had signed a letter of intent with FAW Group to issue new shares in exchange for part of FAW's stake in a vehicle joint venture, widely reported by Chinese media including Caixin and Cailian Press to be FAW Toyota. If completed, FAW would not cash out but would become GAC's second-largest shareholder, while GAC would add a slice of Toyota's China joint-venture profits to its books without spending much cash, according to Huxiu, the Chinese outlet that reported the story.
The deal is still at the planning stage, GAC said. It comes four days after nine Chinese ministries, including the Ministry of Industry and Information Technology, issued a document encouraging automakers to merge and restructure to avoid homogeneous competition. The consolidation would not just reshape GAC and FAW Toyota, but signal how the old monopoly rents of the joint-venture era are being dismantled, Huxiu argued.
How the joint-venture model worked
Since 1994, foreign automakers entering China were required to form 50-50 joint ventures with local partners, a policy that remained in force until 2022. Foreign firms supplied technology, brands and management; Chinese partners contributed land, labor and dealership networks. In theory equal, in practice the foreign side held all the cards on product cycles, supplier lists and local content, Huxiu wrote. The Chinese partner was effectively a contract manufacturer plus local distributor.
The system distributed monopoly rents: foreign capital took the thickest slice through technology premiums, state-owned enterprises shared the rest through their equity, dealers added markups, and local governments collected taxes and jobs. Consumers paid the price, with long waits for popular models and mandatory finance fees. The arrangement was stable for decades because every party received certain returns, and no one wanted to break it.
New-energy technology pulled the rug out from under that structure. A century of mechanical engineering advantage lost value overnight, and Beijing's purchase subsidies, dual-credit rules and license plates for electric vehicles flattened the entry barriers. Joint ventures suddenly became latecomers chasing a market where price wars rage and product cycles have compressed to months, not years.
Three paths for foreign brands
Huxiu argues the joint-venture system is effectively dead, though Toyota and other legacy brands still hold significant customer bases in China. The consolidation sequence is clear: first the weak players exited (Suzuki, Renault, Fiat), then the "twin-car" system collapsed (models like the Corolla and Levin, Camry and Avalon, RAV4 and Wildlander sharing a platform with different badges), then dealer networks merged, and now the legal entities themselves are merging.
Foreign brands now face three paths, according to Huxiu. The Honda path: slow transformation, hollow products, plant closures and inventory clearance, shrinking from mainstream to fringe within two or three years. The Toyota path: accept Chinese partners' leadership, cut duplicate products, keep global models and new-energy brands, surviving in a "smaller but healthy" form that is increasingly defined by China's supply chain. The third path: hand over EV development leadership to Chinese partners entirely, with the foreign brand providing standards, platforms and quality control.
Even Toyota's future role in China is shifting from technology exporter to brand licensor and channel operator, Huxiu wrote. The batteries, electronic controls and smart-driving systems in its bZ-series models are already supplied by Chinese companies. In the old era, China swapped market access for technology; in the new one, Toyota swaps its brand for survival. The tables have turned: Chinese supply chains now hold the pricing power in batteries, electric drives and autonomous driving, and for the first time China is becoming a standard-setter rather than a standard-taker in the world's largest manufacturing industry.
