## Toyota Charts Aggressive Course in China, While US EV Strategy Remains Cautious
Toyota Motor Corp, the Japanese automotive giant, has unveiled ambitious plans to reclaim its dominance in the Chinese market. The company aims to produce at least 2.5 million vehicles annually in China by 2030, signifying a significant commitment to the world’s largest automotive market. This strategy involves bringing sales and production operations closer together and granting local executives greater control over development, according to Reuters.
This move represents a strategic shift for Toyota, as the company seeks to regain market share lost to local competitors like BYD. Unlike other global automakers, including fellow Japanese brands, that have scaled back their presence in China, Toyota is actively increasing its production capacity. By the end of the decade, the automaker aims to reach a production capacity of up to 3 million vehicles per year, a 63% increase from its record output of 1.84 million vehicles in 2022.
Toyota has already begun notifying suppliers about the planned production ramp-up, solidifying its long-term commitment to the Chinese market. The company is streamlining its Chinese joint ventures by integrating sales and production operations for greater efficiency. Moreover, Toyota is shifting more development responsibility to local teams who are more familiar with market preferences, particularly in electrified and connected vehicles.
Toyota’s struggles in China have been attributed to the rise of domestic EV makers who have successfully launched affordable, tech-savvy models that resonate with Chinese consumers. Despite enhancing collaboration between its R&D center in Jiangsu and local joint ventures, Toyota faces challenges as vehicles independently developed by its joint venture partners often outperform those co-developed with Toyota. To address this, Toyota plans to consolidate production for each model at a single joint venture facility and offer the models at dealerships of both joint ventures.
In contrast to its aggressive stance in China, Toyota is adopting a more cautious approach to the US EV market. Jack Hollis, COO of Toyota North America, has criticized US policies that push for rapid electric vehicle adoption without adequately reflecting current consumer demand. Hollis argues that EV sales should grow organically, without penalizing gas-powered vehicles. He points out that government support for EVs has been a contentious topic, particularly during the recent US presidential election.
Hollis highlights the disconnect between the EPA and California emission regulations and consumer preferences. The EPA’s stringent emissions limits, aiming to reduce carbon dioxide output to 85 grams per mile by 2032, have faced criticism from President-elect Donald Trump. California’s regulations are even more stringent, aiming to phase out all new gas-powered cars by 2035, a model adopted by many states. Hollis warns that these measures exacerbate affordability issues, as EVs remain more expensive than traditional vehicles.
While Toyota was initially hesitant to support California’s emissions standards, the company is now planning to introduce two American-made EVs by 2026, alongside its existing all-electric models in the US. This reflects Toyota’s gradual approach to the evolving EV landscape. The company may also reconsider the production balance between fully electric and hybrid batteries at its new North Carolina facility, scheduled to open next year.
Despite its aggressive expansion in China, Toyota’s second-quarter sales saw a decline. The company’s sales were 11.44 trillion yen ($76.29 billion), marking its first quarterly profit drop in two years. However, the figure exceeded analyst estimates of 11.41 trillion yen. Sales volumes decreased by 20%, with the company reporting 2.3 million vehicle sales for the quarter, down from 2.41 million a year ago. Toyota also cut its full-year vehicle production target to 10.85 million from 10.95 million.
Despite the slowdown, TM stock traded higher by 1.19% to $174.08 at the last check on Monday. This suggests that investors remain optimistic about Toyota’s long-term prospects, especially considering its ambitious plans for the Chinese market. Only time will tell how these divergent strategies will play out in the global automotive landscape.
