By Jide

Edited by Ziye

Toyota's core assets in China may soon be consolidated under GAC Group through an asset acquisition.

On October 8 in Guangzhou, Liu Yigong, General Manager of China FAW Group, Kon Tada, President of Toyota Motor Corporation, and Feng Xingya, Chairman of GAC Group, appeared at the same signing ceremony, where the three parties officially signed a new strategic cooperation framework agreement.

The news first emerged a month earlier—on September 14, GAC Group suspended trading and announced the signing of a letter of intent with FAW Group; on September 28, the restructuring plan was disclosed; and on October 8, Toyota joined as a joint venture partner, bringing all three parties to the table.

Restructuring Plan, Source: Shanghai Stock Exchange Official Website

From plan to closing, some time is usually required. However, barring unexpected issues, the 22-year-long separate governance of 'North and South Toyota' will be completely rewritten.

FAW and Toyota began their cooperation in 2002, while GAC and Toyota started in 2004. The two joint ventures have accumulated over 23.56 million users in the Chinese market. According to data from the China Association of Automobile Manufacturers, by 2025, the combined sales of 'North and South Toyota' will account for 17.03% of joint venture passenger vehicle sales, ranking among the top joint venture brands.

If the restructuring is completed, the dual joint venture system of 'North and South Toyota,' which has operated for over two decades, will shift from parallel competition to deep integration.

This marks the first time in China's automotive joint venture history that a central SOE, a local SOE, and a foreign automaker have achieved deep integration through market-oriented share swaps. How was this restructuring designed? What does each party hope to achieve? Can it pioneer a new path for the aging joint venture model?

1. How Was This Restructuring Designed?

Compared to the outside misconception of a 'merger of North and South Toyota,' this restructuring is much lighter in nature.

According to the plan, GAC Group intends to acquire a 50% stake in FAW Toyota held by FAW Group by issuing shares.

After the transaction, FAW Toyota will continue to operate as an independent entity, with its equity structure changing from 'FAW Group 50% + Toyota Motor 45.77% + Toyota China 4.23%' to GAC Group and Toyota entities each holding 50%.

The 'light' nature is reflected in three aspects that remain unchanged.

An interpretation of the transaction's nature reveals the following: Toyota's rights and interests as the foreign party remain untouched, with its shareholding ratio preserved; GAC Group's actual controller remains the Guangzhou SASAC, and the transaction does not constitute a backdoor listing; FAW Toyota's legal entity, brand, and factories will remain in their original locations, and employees' labor relations will not automatically transfer with the equity change.

GAC made it clear that this cooperation differs from the traditional state-owned asset reform model of 'full acquisition, entity restructuring, and system integration.' Instead, it represents a cross-level, cross-regional flexible collaboration that maximizes the preservation of both parties' original operational vitality.

Source: GAC Group Official Website

The most significant change from this acquisition is the shift in FAW's position.

This asset acquisition effectively consolidates Toyota's core joint venture resources in China under GAC's umbrella.

Correspondingly, FAW will exit its direct shareholding in FAW Toyota, acquiring more than 5% of GAC Group's shares to become its second-largest shareholder and a potential affiliated legal entity of the listed company.

In other words, FAW will transition from operator to strategic shareholder. It is reasonable to infer that after joining the board, FAW Group will retain influence over strategic issues such as procurement, R&D, and production capacity.

Changes in the external market environment are undoubtedly one of the key factors driving the three parties to reach a consensus.

In recent years, competition in the automotive industry has intensified to an unprecedented level. Industry homogenization, coupled with weakening domestic demand and ongoing price wars squeezing profits, has accelerated the concentration of the industry toward leading players.

During the same period, national automotive industry policies have shifted toward regulating industry order and promoting inventory integration. On September 11 this year, nine departments including the Ministry of Industry and Information Technology issued the '15th Five-Year Plan for the Development of the Intelligent Connected New Energy Vehicle Industry,' explicitly proposing to 'increase the intensity of mergers, acquisitions, and cross-regional integration of automotive enterprises in accordance with the law.'

In the current environment, cross-regional integration has become a necessary means for automakers to enhance their competitiveness and resist industry changes.

2. Why Do All Three Parties Need This Restructuring?

The three parties have come to the table, but each has a entirely different set of calculations.

As a global automotive giant, Toyota's primary pressure now comes from the Chinese market dragging down its global performance. In the first half of 2026, Toyota's global production reached 4.8637 million units, down 1.2% year-on-year; sales reached 5.0089 million units, down 2.9% year-on-year.

This marked Toyota's first decline in both production and sales in nearly two years, primarily due to structural issues faced by joint venture brands in the domestic market.

Before 2012, joint venture brands held over 60% of the domestic market share. However, according to the latest data from the China Passenger Car Association, from January to August this year, domestic brands accounted for 66.2% of the market share, while joint venture brands accounted for 33.8%.

As the market shifts to Stock competition , Toyota's past strategy of 'one brand, dual joint ventures' in China has become less effective.

This strategy was once a tool for expansion, allowing two enterprises to develop independently in the north and south to capture market share as much as possible. However, it has now become a source of internal friction: highly overlapping product lines equate to competing for the same customer base; the greater the investment in new energy and intelligence, the more costly the duplication and waste become across the two systems in development and procurement.

For Toyota, integrating the two Chinese partners into a unified operational window can both reduce costs and accelerate the electric transformation, preventing the Chinese market from continuing to drag down its global performance.

For GAC Toyota and FAW Toyota, shifting from independent development, procurement, and channel-building to unified sharing can amplify scale synergies, reduce redundant investments, and share the costs of technological innovation.

The saved resources can be concentrated on independent brands and new energy businesses, increasing their weight in the restructuring of the automotive industry chain.

Beyond resource integration, their financial positions will also change.

In recent years, GAC's net loss attributable to the parent company has continuously declined, falling from RMB 4.429 billion in 2023 to RMB 824 million in 2024, then turning into a massive loss of RMB 8.784 billion in 2025, and further losing RMB 4.467 billion in the first half of 2026.

One reason for the losses is the continuous investment in the new energy transition: in the first half of 2026 alone, GAC's independent R&D investment reached RMB 4.834 billion, up 27.58% year-on-year, with cumulative R&D investment exceeding RMB 67 billion.

After acquiring a stake in FAW Toyota, it will be jointly controlled by GAC and Toyota entities, with the company accounted for as a joint venture using the equity method—its revenue will not be consolidated into GAC's financial statements, but half of its net profit will be fully recorded under GAC's 'investment income' category, potentially amounting to billions of yuan.

GAC also explicitly mentioned this transaction purpose in the plan, stating that the restructuring can 'inject profitable assets and improve the listed company's profitability.'

Source: GAC Group Official Website

At the performance level, FAW may also benefit. Its main crisis lies in sales—FAW Toyota's overall sales have declined significantly this year, with cumulative sales of 379,000 units in the first eight months, surpassed by GAC Toyota (447,000 units during the same period).

After the transaction, GAC's production and sales will, to a considerable extent, be included in FAW's performance metrics. This is not without precedent. In December 2025, FAW Group acquired a ~5% stake in Leapmotor for RMB 3.744 billion, and Leapmotor contributed approximately 32,000 units to FAW's sales statistics that year.

In summary, Toyota seeks efficiency, while GAC and FAW seek a way forward—this restructuring is their most realistic choice at present.

3. After Integration, Can One Plus One Be Greater Than Two?

Restructuring and integration are major undertakings. Forging a new path and gaining an edge in the new energy market will not be easy.

If the new energy transition continues, GAC Toyota will undoubtedly remain at the forefront, as its transition is significantly faster than that of FAW Toyota.

The bZ3X, launched in March last year, achieved sales of over 100,000 units in 14 months, setting the fastest record among joint venture new energy vehicles; from January to August this year, the bZ3X alone sold 59,700 units, firmly ranking first in the joint venture pure electric market segment .

During the same period, FAW Toyota's bZ5 sold less than 10,000 units, with an overall absence in new energy.

However, FAW Toyota also has its strengths. It has previously absorbed Toyota's TPS lean production system, accumulating experience in manufacturing processes, industrial workers, and parts systems; its Chengdu base is Toyota's first complete vehicle joint venture project in China and remains one of the few flexible mixed-line complete vehicle bases in the country covering sedans, SUVs, and buses. This demonstrates FAW's ability to 'build good cars.'

Beyond the new energy system and vehicle manufacturing, there is potential for complementarity in production capacity and regional markets. However, real-world integration faces numerous obstacles, requiring consideration of the interests of all parties and how to merge different teams.

Source: FAW Toyota Official Website

At the same time, the transition requires continuous investment in new energy technologies and other areas, often forcing companies to make large investments while also being cost-conscious. Whether resource integration after restructuring can create space for cost-consciousness becomes critical.

For example, issues such as product planning differentiation—where various sister models highly overlap and require decisions on what to discard and retain—and the shift from decentralized procurement and supply chains to collaboration, enabling joint procurement in areas like batteries, chips, intelligent driving hardware, automotive electronics, and raw materials to enhance procurement leverage and cost-saving potential, etc.

The current outlook is relatively optimistic. Citibank estimates that from model rationalization to joint procurement and then to dealership network integration, savings of approximately 2-3 percentage points in selling costs and 1-2 percentage points in selling and administrative expenses are expected.

Notably, the question of whether the two companies will be redivided in their roles after restructuring remains unconfirmed.

According to a report by Automotive Business Review, sources close to the transaction revealed that a new company would be established, with the original GAC Toyota team primarily responsible for R&D and supply chains, and the original FAW Toyota team primarily responsible for marketing, channels, and customer operations.

However, as of the three parties signing, this divisional arrangement had not been officially confirmed, with the official stance merely stating that the two joint ventures will 'jointly shoulder' functions such as R&D, procurement, production, and sales.

Currently, market speculations abound. One speculate on business differentiation is that FAW Toyota will focus on hybrid models, while GAC Toyota will continue to specialize in pure electrics.

Currently, new energy is the fastest-growing segment in the market, with retail penetration surpassing that of fuel vehicles. Among them, the pure electric segment is the largest, and GAC Toyota already has a proven pure electric system in hand, giving it a greater opportunity to continue capturing market share.

FAW Toyota, on the other hand, has achieved greater scale and results in hybrids. According to its data, in 2025, its intelligent electro-hybrid dual-engine models sold 380,100 units, up 14% year-on-year, accounting for approximately 47% of its total sales.

From a regional market structure perspective, such a division also has natural rationality. FAW Toyota's roots are in the north, where winter cold naturally disadvantages pure electric range performance; GAC Toyota is backed by the Pearl River Delta, with southern China being one of the regions with the highest new energy penetration and acceptance rates in the country.

However, speculations remain just speculations. How 'North and South Toyota' will ultimately be divided depends on the next steps taken by the three parties.

Source: FAW Toyota Weibo

From an industry perspective, if the integration between China FAW Group and GAC Group succeeds, it will not only change the fortunes of the two companies but also spark imagination across the automotive industry.

Prior to this, various forms of synergistic integration have already occurred among automakers and within automaker groups: in June 2024, Changan Automobile and GAC Group signed a strategic framework agreement; in October of the same year, SAIC Motor's Roewe and Feifan officially merged; in November of the same year, Geely Group announced strategic synergies between its Zeekr and Lynk & Co brands.

However, this marks the first time that a central SOE and a local SOE have completed capital integration through market-oriented share swaps. If it succeeds smoothly, the possibilities and space for integration among central SOEs, local SOEs, traditional private enterprises, and new energy automakers will become even greater.

(The header image of this article is sourced from FAW Toyota Weibo.)