Toyota Aims to Boost Production in China by 2030
Toyota has announced significant changes to its strategy by intensifying its vehicle production plans in China, aiming to produce at least 2.5 million units annually by 2030. This move is designed to more closely integrate sales and production operations while granting local managers greater autonomy in vehicle development.
This decision differs from the approaches taken by other global car manufacturers, particularly Japanese competitors, who have exited or downsized their presence in the Chinese market. Toyota's goal is to potentially increase production to 3 million vehicles annually by the end of the decade, although an official target has yet to be set.
After a record production of 1.84 million vehicles in 2022, Toyota aims to regain market share lost to BYD and other local brands, increasing output by 63%. The company has communicated to its suppliers its intentions to ramp up production, reinforcing its commitment to the Chinese market and ensuring a stable supply chain.
In response to inquiries, Toyota emphasized that it continues to evaluate various initiatives in the highly competitive environment of China and is committed to developing its vehicles for the local market.
The automaker is preparing to further integrate operations of its two joint ventures in China to enhance efficiency. Additionally, there is a strategic move to grant more development responsibilities to its China-based personnel, who are more familiar with local market preferences, particularly in the areas of electrification and connected vehicle technology.
Toyota acknowledged the need to rely more on local expertise to accelerate product development and indicated that failing to do so could be detrimental. The company has been left behind by domestic EV manufacturers who have successfully launched affordable, technologically advanced battery vehicles in China.
In 2023, Toyota announced efforts to deepen collaboration between its research and development center in Jiangsu province and the two local joint ventures. This came after observations that vehicles developed by joint venture partners, such as FAW Group's Hongqi brand and GAC Group's Aion EV, performed better than Toyota's offerings.
To address this, Toyota plans to integrate the knowledge of local partners more effectively into its vehicles. The company also intends to consolidate the production of each vehicle model within a joint venture, ensuring that models are sold at dealerships of both partnerships rather than producing "twin vehicles."
This strategic pivot comes at a time when Japanese automakers and suppliers are facing challenges in China. In its earnings announcement on Wednesday, Toyota reported a decline in operating income from its China operations in the first half of the fiscal year, primarily due to increased marketing expenses in the face of intense competition from Chinese brands.
The competitive landscape has led Mitsubishi Motors Corp to withdraw from China and Honda Motor and Nissan Motor to opt for reduced local production capacity. Toyota's increased investment demonstrates its commitment to strengthening its presence and adapting to the evolving Chinese automotive market.