Toyota Motor (7203): Reorganization of Chinese joint ventures; sales network and platform integration synergies in focus moving forward

Toyota Motor announced on October 8 that it has entered into a new strategic alliance with its Chinese joint venture partners Guangzhou Automobile Group (GAC) and China FAW Corporation (FAW). GAC will acquire the 50% stake in FAW Toyota held by FAW, bringing GAC Toyota and FAW Toyota under the umbrella of GAC. We expect this will facilitate rapid business development and see potential for the development of NEV platforms and software defined vehicle (SDV) models for the Chinese market, the integration of sales networks, and other business synergies. Toyota's business in China remains challenging: in January-August 2026, its retail sales volume declined to 928k units (-19% YoY). Although Toyota has introduced strategic NEVs such as the bZ3X and bZ7, it has not been able to sustain initial sales momentum. The company plans to build a new wholly-owned plant in Shanghai in 2027 and turn around its Chinese business by launching next-generation SDVs. We rate the stock Overweight with a Decem