0425 GMT - China's auto industry is in need of further consolidation, Macquarie analysts say in a note. Recent developments suggest some progress in this regard, they say. Chinese state-owned automaker GAC is acquiring part of automaker FAW's stake in an undisclosed vehicle manufacturing joint venture through share issuance, they note. The transaction could support capacity rationalization while reducing competition for the industry, they add. Overseas expansion for Chinese players is an important growth driver, although policy uncertainty may continue to weigh on sentiment, they say. BYD and Geely Automobile are Macquarie's picks, given their progress in localizing overseas production and scale advantages.