GAC Group and FAW Group Plan Major Asset Restructuring

The GAC Group signed a letter of intent with FAW Group on September 14 to pursue a major asset restructuring. GAC Group plans to issue shares to acquire a portion of FAW Group's stake in a vehicle manufacturing joint venture, which Chinese state media identified as FAW Toyota. If the transaction is completed, FAW Group is expected to become the second-largest shareholder of GAC Group.

Following the announcement, GAC Group suspended trading of its A shares and Hong Kong-listed shares, with the A-share suspension expected to last up to 10 trading days. The restructuring aims to integrate Toyota's separate northern and southern operations in China to increase efficiency and reduce overlapping investment. This shift comes as foreign automakers face shrinking profit margins and a brutal price war, leading Toyota's combined joint ventures to drop to 7% of passenger vehicle sales from a second-place ranking in 2021.

The move aligns with the Government of China's 15th Five-Year Plan, which encourages mergers and consolidation within the state-owned automotive sector to combat production overcapacity and weakening domestic demand. The agreement remains preliminary and is subject to internal decision-making and regulatory approvals.