Key facts
- China FAW Group is planning to acquire a stake in Guangzhou Automobile Group (GAC).
- GAC's shares were halted on Monday pending disclosure of "inside information."
- The potential tie-up is part of a government-backed push to consolidate state-owned automakers.
- Both FAW and GAC are joint-venture partners with Toyota in China.
- GAC's Shanghai-listed shares have fallen 37.85% this year.
Shares of Guangzhou Automobile Group (GAC) were suspended from trading in Hong Kong and Shanghai on Monday, with the company citing the need to disclose "inside information." The halt followed speculation over the weekend that China FAW Group, another state-owned automaker, is planning to acquire a stake in GAC.
Sources familiar with the matter told Caixin Global that the potential tie-up is part of a renewed government effort to consolidate underperforming state-owned carmakers, aiming to reduce excess capacity and create stronger national champions amid a challenging domestic market. The specific method and size of FAW's potential stake in GAC have yet to be determined.
Both FAW and GAC are key joint-venture partners with Japan's Toyota Motor Corp in China, operating FAW Toyota and GAC Toyota, respectively. GAC's Shanghai-listed shares had fallen 37.85% this year prior to the trading suspension, trading at 5.09 yuan apiece.
The Chinese government has recently signaled its commitment to auto industry consolidation. On September 11, the Ministry of Industry and Information Technology (MIIT) released its 15th five-year plan for the intelligent connected new energy vehicle (NEV) industry, which calls for stepping up mergers and restructuring. Officials from the National Development and Reform Commission have also stated that the government will support reforms and mergers among large corporate groups.