Toyota falters as Japan EV hesitancy becomes the second victim in China

Toyota Motor, Japan’s largest manufacturer, is laying off staff in China as it battles to compete in the world’s largest EV market.

Toyota fires employees as China transitions to EVs

Japanese automakers are making mistakes in China’s changing automotive landscape. Toyota’s joint venture with China’s Guangzhou Automobile Group (GAC) lay off workers this weekend, according to a new Reuters story. According to three affected employees, the move comes as the Japanese manufacturer struggles in China’s ultra-competitive auto market, which is fast moving to EVs. The joint venture’s Chinese plant employs over 19,000 people and produces models such as Toyota’s first EV, the bZ4X, as well as the Camry and Levin models.

Toyota will release the bZ4X in China in October 2022 at a starting price of 199,800 yuan (about $19,000). However, after numerous market leaders dropped prices, including BYD and Tesla, Toyota struggled to gain traction. Through January, the Japanese carmaker sold 3,844 bZ4X cars in China, accounting for only 0.26% of China’s EV market. To increase sales and remain competitive, the manufacturer cut prices by 15% earlier in February, with a new beginning price of roughly 169,800 yuan ($24,800).

Also read: Japanese Nissan Now Aims to Catch Up With Tesla in The USA and Volkswagen Group in Europe

So far, the measure has had no effect, with EV sales plunging 9% in the first half of the year.

Despite the fact that Toyota (through FAW-Toyota) launched its first electric vehicle in China earlier this year, the BYD-powered bZ3, with prices starting at 189,800 yuan ($27,000), Toyota (via FAW-Toyota) is recalling (not OTA) over 12.2K bZ3 electric sedans due to defective rear door handles.

Former Lexus branding chief executive Koji Sato remarked in April, after taking over for longstanding leader and grandson of the company’s founder (Akio Toyoda), that Toyota would need to act quickly to keep up in China’s EV industry.

Toyota Struggles in China as Japan
Image Credit Top Car News Network

Japanese manufacturers suffer as a result of China’s EV market

Japanese automakers’ market share in the region has declined from 20% last year to 14.9% in the first half of 2023, according to the China Association of Automobile Association. Electric vehicle sales in China hit over 2 million in the first five months of the year, rising 51.5% year on year, as purchasers continue to embrace EVs at an unprecedented rate. Japanese manufacturers, perhaps the largest laggards in the EV market, are experiencing the brunt of the pain.

Mitsubishi Motors, for example, announced in a memo last week that it was stopping operations in China indefinitely due to a drop in sales. According to the document (via Bloomberg): Mitsubishi’s sales have dropped drastically since peaking at over 134K in 2019, with only 34.5K vehicles sold in 2022. The drop in sales corresponds with China’s brisk EV industry, which has been supported by renewable energy incentives and other government programmes. Due to a lack of electric vehicle models to compete with domestic automakers, nearly all Japanese automakers, including Honda, Mazda, and Nissan, are witnessing sales decline in China.

Also read: Toyota Creates New Role to Boost EV Production in North America

Chinese brand sales accounted for 53% of the market in the first half of the year, as domestic EV manufacturers such as BYD, NIO, Li Auto, and XPeng continue to capture market share with distinctive models in virtually every segment. A Climate Group analysis last year warned Japan that failing to increase EV generation may result in a 14% decrease in GDP, and it’s becoming increasingly clear that’s where we’re headed.

Not only are Japanese automakers under pressure. Volkswagen, a market leader in China, had its sales fall 3.6% last year and was surpassed by BYD in passenger car sales in the first half of the year.

As a result, the majority of the manufacturers included here have lately increased their EV efforts, including investments in battery technology, dedicated EV platforms, and more efficient vehicles.

Japan is providing more than 330 billion yen ($2.3 billion) in subsidies to promote storage battery technology. Toyota will receive roughly 120 billion yen ($847 million) of it to fund its recently announced EV battery plans.

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