FAW to Become GAC's Second-Largest Shareholder in Landmark SOE Auto Merger

FAW and GAC Strike Major Asset Deal

Guangzhou-based GAC Group announced on September 14 that it has signed a letter of intent with China FAW Motor Co., Ltd. to restructure their joint ventures through a share-issuance deal that would make FAW GAC's second-largest shareholder.

The two companies have not yet disclosed which specific joint venture's equity would be injected into the deal, nor the valuation or final ownership stake FAW would hold in GAC. GAC's A-share listing was halted from the September 14 open, with the suspension expected to last no more than 10 trading days.

The transaction is expected to constitute a major asset restructuring and related-party deal, but GAC said it would not change the company's actual controller or qualify as a reorganization listing.

Toyota JV Likely at the Center of the Deal

While details remain scarce, industry observers note that both GAC and FAW operate Toyota joint ventures — GAC Toyota and FAW Toyota respectively. From a resource integration perspective, the undiscosed "complete vehicle joint venture" is likely Toyota-related.

FAW Toyota, co-owned 50-50 with Toyota Motor Corp., is headquartered in Tianjin and operates four complete-vehicle plants, two engine factories, and supporting R&D, logistics and sales operations across Tianjin, Changchun and Chengdu.

FAW also holds a 60% stake in FAW-Volkswagen, which runs production bases in five cities including Foshan and Tianjin, alongside Audi branding.

Policy Push Meets Market Reality

The announcement came just three days after China's Ministry of Industry and Information Technology held a press conference on intelligent connected new-energy vehicles, where National Development and Reform Commission official Shao Ji explicitly said the government would support large enterprise groups in carrying out reforms and market-oriented mergers and acquisitions to reduce redundant product development and technical competition.

The timing underscores urgency on both sides. GAC's annual sales fell from 2.505 million units in 2023 to 1.7215 million in 2025 — a drop of more than 780,000 units — and the company posted its first-ever annual loss in 2025, with net profit attributable to shareholders falling to negative 8.784 billion yuan ($1.22 billion). The loss persisted into 2026's first half at negative 4.467 billion yuan, even as H1 sales rose 2.35% year-on-year to 773,100 units.

FAW, meanwhile, sold 3.302 million vehicles in 2025 but relies on joint ventures for more than 2.3 million of those, leaving its domestic brand portfolio under pressure in the fast-growing new-energy passenger-car segment.

What Each Side Brings to the Table

GAC holds capabilities FAW needs, most notably in its Aion EV brand, which has managed hundreds of thousands of units in pure-electric production and sales. GAC has also invested heavily in pure-electric platforms, batteries, electric drives and new-energy supply chains over recent years.

Its major R&D and manufacturing bases sit in Guangzhou and the greater Pearl River Delta, close to China's most mature consumer-electronics, chip and smart-hardware supply chains — increasingly critical resources in the smart-vehicle era.

FAW offers larger complete-vehicle scale and an established manufacturing, procurement and supply-chain system. Combined, the capital relationship could move cooperation beyond symbolic strategic agreements into tangible resource sharing.

Who's Next?

China still has several large state-owned auto groups beyond FAW and GAC, including Dongfeng, Changan, SAIC and Beijing Automotive. Many maintain their own independent brands, R&D institutes, EV platforms, battery projects and smart-driving teams.

Meanwhile, private competitors like BYD, Geely and Chery are scaling sales to spread R&D and manufacturing costs, while Xiaomi and other tech entrants are raising the investment bar for automotive intelligence.

If state-owned automakers continue building parallel platforms and supply chains, the resulting duplication could stretch thin resources and weaken product competitiveness. FAW and GAC have now taken the first step; how the rest of the sector responds remains to be seen.