China Pushes Auto Consolidation: FAW to Acquire Stake in GAC
China's government is actively encouraging mergers and acquisitions among its state-backed automakers to combat intense competition and declining profitability. FAW Group, the parent company of Hongqi, which sells cars in Israel, is set to become the second-largest shareholder in GAC Group, the manufacturer of AION vehicles, also sold in Israel. The full impact on the Israeli market remains uncertain due to the time required for the deal to finalize.
According to Chinese reports, GAC announced a trading halt on Monday, followed by the revelation of a joint venture with FAW, potentially involving a Toyota factory for the Chinese market. This move will see FAW become GAC's second-largest shareholder.
Financial figures highlight the industry's struggles. In 2025, GAC sold 1.72 million cars, a 14.6% decrease from 2024, with revenues falling 10.4% to 95.7 billion yuan ($1.4 billion). Profit declines continued into the first half of 2026. FAW Group produced 3.31 million vehicles in 2025, down from 3.73 million in 2024.
This consolidation aligns with a March 2025 directive from China's State-owned Assets Supervision and Administration Commission (SASAC), which mandated the reorganization, including mergers, of state-controlled automakers to improve efficiency.
