Toyota To Make Strategic Shift In China, EVs

Toyota Motor Corp TM shared ambitious production goals for China while maintaining a cautious stance towards the U.S.

The Japanese automaker plans to produce at least 2.5 million vehicles annually in China by 2030.

Toyota aims to bring its sales and production operations closer together and give local executives more control over development, Reuters reports.

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This strategic shift marks a notable pivot for the automaker as it seeks to regain market share lost to local competitors like BYD.

Unlike other global automakers, including fellow Japanese brands scaling back in China, Toyota aims to boost its production capacity to as many as 3 million vehicles per year by the end of the decade.

Although Toyota has not set a formal target, the higher figure would represent a 63% increase from its record output of 1.84 million vehicles in China in 2022.

Reuters stated that Toyota has already begun notifying suppliers about the planned production ramp-up to secure its supply chain and signal its long-term commitment to the Chinese market.

The automaker aims to streamline its Chinese joint ventures by integrating sales and production operations for greater efficiency while shifting more development responsibility to local teams familiar with market preferences, particularly in electrified and connected vehicles.

Toyota’s struggles in China have been compounded by domestic EV makers, who have quickly launched affordable, tech-savvy models that appeal to Chinese consumers.

While Toyota has enhanced collaboration between its R&D center in Jiangsu and its local joint ventures, it still faces challenges as vehicles independently developed by its joint venture partners outperform those co-developed with Toyota.

Therefore, Toyota plans to consolidate production for each model at a single joint venture facility and offer the models at dealerships of both joint ventures.

Last week, China unveiled a new fiscal stimulus package committing 6 trillion yuan ($840 billion) to alleviate hidden debt burdens faced by local governments.

The broad financial initiative, scheduled for completion by the end of 2026, signals a major effort by Beijing to tackle rising economic challenges and boost growth in the face of global uncertainties.

Meanwhile, Toyota’s North American COO criticized U.S. policies that push rapid electric vehicle (EV) adoption and fail to reflect current consumer demand.

Jack Hollis, COO of Toyota North America, argued that EV sales should grow naturally without penalizing gas-powered vehicles, noting that government support for EVs has been a contentious topic in the recent U.S. presidential election, Bloomberg reports.

Hollis pointed out that the EPA and California emission regulations are “ahead of the consumer,” creating a mismatch with what buyers want.

In March, the EPA introduced stringent emissions limits to reduce carbon dioxide output to 85 grams per mile by 2032. These rules, endorsed by the Biden-Harris administration, faced criticism from President-elect Donald Trump throughout the campaign.

California’s regulations go even further, aiming to phase out all new gas-powered cars by 2035, a model many states have adopted. Hollis, who oversees Toyota’s U.S. sales, warned that such measures exacerbate affordability issues as EVs remain more expensive than traditional vehicles.

Previously, Toyota was among the last automakers to withdraw support for the Trump administration’s effort to prevent California from setting its emissions standards.

Toyota plans to introduce two American-made EVs by 2026, in addition to its existing all-electric models in the U.S., following a more gradual approach to the EV market shift.

Hollis mentioned that Toyota might reconsider the production balance between fully electric and hybrid batteries at its new North Carolina facility, slated to open next year.

The plant includes ten production lines for electric and plug-in models alongside four dedicated lines for hybrid batteries, reflecting Toyota’s incremental strategy in the evolving EV landscape.

Toyota’s second-quarter sales were 11.44 trillion yen ($76.29 billion), marking its first quarterly profit drop in two years. However, it topped analyst estimates of 11.41 trillion yen. Sales volumes declined 20%.

The company reported 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.

Price Action: TM stock traded higher by 1.19% to $174.08 at the last check on Monday.

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