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Toyota Extends Production Reduction in China

Abdullah  09 Nov 2023   354   Toyota
Toyota Extends Production Reduction in China

Toyota Extends Production Reduction in China

Japanese automaker Toyota recently celebrated reaching a significant milestone of producing 300 million vehicles. However, the company is encountering challenges in China, the world's largest and most competitive car market.

Extended Production Cuts Amidst Rising Competition

To alleviate inventory pressure on dealers, Toyota has decided to extend its production cuts in China by three months. This move comes in response to increased competition from domestic automakers like BYD, Geely, and Tesla, prompting the automaker to reduce production at its Tianjin joint venture with state-owned FAW Group in October and November.

Industry-Wide Price Reductions and Overcapacity Woes

The Chinese auto market has witnessed a trend of major brands slashing prices over the past year due to overcapacity. Numerous local manufacturers are grappling with the challenges posed by intensified competition. Honda and Nissan, fellow Japanese brands, have also faced the need to cut output in China. In response, these companies are focusing on battery electric vehicle (BEV) production and export plans to stay competitive.


Strategic Measures to Navigate the Market Landscape

Earlier this year, Toyota implemented production cuts and laid off around 1,000 workers at its main Chinese joint venture with Guangzhou Automobile Group (GAC-Toyota), which produces the bZ4X EV. FAW-Toyota, in a communication to its dealers, announced an extension of production cuts until the end of February 2024 to ensure operational sustainability in the challenging market.

Challenges in the Electric Vehicle Segment

In the rapidly growing electric vehicle (EV) segment in China, Toyota's FAW-Toyota joint venture is facing difficulties. The joint venture is currently producing the CHR-based Izoa BEV, along with RAV4 and Corolla plug-in hybrids, and a variety of internal combustion engine (ICE) models. Cumulative sales from both Toyota joint ventures (FAW-Toyota and GAC-Toyota) in China for the first nine months of the year reached 1.38 million vehicles, reflecting a 9% decrease compared to the previous year.

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