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Target production of at least 2.5 million vehicles annually by 2030, marking a shift in Toyota’s China strategy. By Maki Shiraki
Tokyo, November 9 (Reuters) – Toyota is set to increase its annual vehicle production in China to at least 2.5 million units by 2030, according to sources familiar with the matter. The new plan represents a major shift in strategy, focusing on streamlining its Chinese operations by bringing together local sales and production activities while giving greater autonomy to local management teams.
This move is Toyota’s response to the growing competition from domestic Chinese automakers, such as BYD, which have gained significant market share, especially in the electric vehicle (EV) segment. Toyota’s new plan reflects its commitment to regaining lost ground in the world’s largest car market.
Unlike several other global automakers, including Japanese competitors, that have scaled back operations or completely withdrawn from China, Toyota is betting on expansion. Sources indicate that the company is aiming for production capacity of up to 3 million vehicles annually by the end of the decade, though a formal target has yet to be established. This goal is a 63% increase from the 1.84 million vehicles Toyota produced in China in 2022, with production slightly declining to 1.75 million units in 2023.
Strengthening Supplier Relationships
In anticipation of this production ramp-up, Toyota has reportedly communicated its plans to suppliers, assuring them of its commitment to China. This strategic move aims to secure the supply chain and ensure the necessary components are available for the increased production volume.
When asked about the plans, Toyota confirmed it is constantly evaluating new initiatives to stay competitive in the Chinese market. The automaker emphasized its goal of making "ever-better cars" for local consumers, underscoring its focus on adapting to the demands of this rapidly changing market.
Focusing on Local Expertise
To improve efficiency, Toyota intends to bring its sales and production functions closer together across its two Chinese joint ventures. This restructuring will also involve shifting more development responsibilities to local staff, who have a better understanding of China’s unique consumer preferences, especially in the growing sectors of electrification and connected car technology.
This strategic change highlights Toyota’s recognition of the need to leverage local expertise to accelerate product development in China. One source noted, "If Toyota doesn’t move quickly, it could fall behind."
Challenges from Domestic EV Manufacturers
One of Toyota’s main challenges is the success of Chinese domestic automakers, who have rapidly rolled out affordable, tech-rich EVs. Last year, Toyota revealed plans to strengthen its R&D collaboration with its joint ventures in China, aiming to improve competitiveness and better integrate local innovations into its product lineup.
A key concern for Toyota is that vehicles developed by its joint venture partners are outselling Toyota-branded models. For example, vehicles from FAW Group’s Hongqi brand and GAC Group’s Aion EV are performing better than those produced under the FAW Toyota Motor and GAC Toyota Motor brands. In response, Toyota plans to better integrate the expertise of its local partners into its product designs.
Under the new strategy, Toyota plans to consolidate production of vehicles at one of its joint ventures instead of producing identical models at both. The new models will be available at dealerships across both ventures, further streamlining operations and improving efficiency.
Increasing Pressure from Chinese Competitors
Toyota’s push to boost its presence in China comes as foreign automakers, including Japanese companies, face intense price competition from local brands. Toyota recently reported a decline in operating income in China for the first half of the financial year, largely due to the rising costs of marketing amid increasing competition.
This competitive environment has led some Japanese automakers, including Mitsubishi Motors, to exit the Chinese market. Others, such as Honda and Nissan, have opted to scale down their production capacity in the region.