Toyota signs strategic pact with China's FAW and GAC, reorganising joint ventures
In short
Toyota said on October 8 that it had signed a new strategic partnership agreement with China FAW and Guangzhou Automobile Group (GAC), both major state-owned Chinese carmakers, to accelerate electrification and vehicle intelligence. As part of a reorganisation of Toyota's two Chinese joint ventures, GAC is to acquire the 50% stake in FAW Toyota held by FAW, bringing both FAW Toyota and GAC Toyota under GAC.
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Toyota Motor said on October 8 that it had signed a new strategic partnership agreement with China FAW and Guangzhou Automobile Group (GAC), both major state-owned Chinese carmakers. The three companies plan to strengthen cooperation to accelerate electrification and vehicle intelligence, and aim to offer highly competitive products, Tokyo Shimbun reported. Nikkei described the deal as a strategic partnership agreement, while Tokyo Shimbun described it as a framework agreement on a new strategic partnership. [ 1 , 2 ]
As part of a reorganisation of Toyota's two Chinese joint ventures, GAC will acquire 50% of the shares of FAW Toyota, taking over the stake held by FAW, according to Nikkei, and FAW Toyota would then be owned equally by GAC and Toyota. Tokyo Shimbun reported that GAC had announced in September that it would acquire the 50% stake, buying all of FAW's FAW Toyota shares, and would then hold both Japanese joint ventures, FAW Toyota and GAC Toyota. Tokyo Shimbun said the aim is to make development and investment more efficient. [ 1 , 2 ]
Toyota called the reorganisation "an important initiative to further deepen the cooperative relationship", Nikkei reported. The two joint ventures already cooperate in research and development, procurement, production and sales. Nikkei said that if the transaction is carried out, both of Toyota's vehicle joint ventures will come under GAC, changing the framework of the partnerships. [ 1 ]
A signing ceremony was held in Guangzhou on October 8 and was attended by Toyota President Kenta Kon (近健太), according to Tokyo Shimbun. Nikkei reported that executives from FAW and GAC also attended. [ 1 , 2 ]
FAW Toyota's predecessor company was founded in 2000, and GAC Toyota was established in 2004 with investment from Toyota and GAC; the current capital relationships have lasted roughly a quarter of a century, Nikkei reported. [ 1 ]
Toyota's sales in China are struggling, according to Nikkei: its August sales in China, including Lexus, fell 23% from a year earlier to 118,449 vehicles. Nikkei said electric vehicles had been driving growth in the Chinese market, but new vehicle sales have weakened, and excessive competition has pushed down prices and reduced companies' profitability. Toyota aims to regain ground by producing, in 2027, range-extender EVs (EREV), which carry an engine for generating power, and longer-range next-generation EVs under the Lexus brand, Nikkei reported, adding that the reorganisation is expected to help improve cost competitiveness by strengthening the partnerships. [ 1 ]
Why it matters
If the transaction goes ahead, both of Toyota's vehicle joint ventures in China will come under GAC, changing a capital structure that Nikkei said has lasted roughly a quarter of a century. The move comes as Toyota's sales in China fell 23% in August, and Nikkei said stronger ties are expected to improve cost competitiveness.
Key facts
- Toyota announced on October 8 a new strategic partnership agreement with state-owned carmakers China FAW and Guangzhou Automobile Group (GAC). [ 1 , 2 ]
- The three companies aim to accelerate electrification and vehicle intelligence. [ 1 , 2 ]
- GAC is to acquire the 50% stake in FAW Toyota held by FAW. [ 1 , 2 ]
- FAW Toyota would then be owned equally by GAC and Toyota. [ 1 ]
- Both of Toyota's Chinese vehicle joint ventures, FAW Toyota and GAC Toyota, would come under GAC. [ 1 , 2 ]
- Toyota President Kenta Kon (近健太) attended the signing ceremony, held in Guangzhou. [ 2 ]
- Toyota's August sales in China, including Lexus, fell 23% from a year earlier to 118,449 vehicles. [ 1 ]
Confirmed by several sources
- Toyota announced on October 8 a new strategic partnership agreement with China FAW and GAC. [ 1 , 2 ]
- The partnership aims to accelerate electrification and vehicle intelligence. [ 1 , 2 ]
- GAC is to acquire FAW's 50% stake in FAW Toyota, bringing both FAW Toyota and GAC Toyota under GAC. [ 1 , 2 ]
- Toyota President Kenta Kon attended the signing ceremony. [ 1 , 2 ]
Still unclear
- When the share transfer will be completed and on what financial terms. None of the documents give a timetable or price for the transaction.
- Whether the transaction still needs further steps before it takes effect. Nikkei describes the outcome conditionally, as what happens if the transaction is carried out.
- The aim of making development and investment more efficient. Only Tokyo Shimbun states this aim.
- Nishi-Nippon Shimbun's coverage. Only its headline was available.
What local media are saying
Timeline, local time
- Nikkei reports Toyota's new strategic partnership agreement with FAW and GAC and the joint venture reorganisation. [ 1 ]
- Tokyo Shimbun reports the framework agreement and the signing ceremony in Guangzhou attended by Kenta Kon. [ 2 ]
- Nishi-Nippon Shimbun reports Toyota's new framework with two Chinese companies to accelerate electrification. [ 3 ]