Toyota Reinforces China Strategy with Focus on Localized Production

Toyota's latest quarterly report highlights the company’s ambitious plans to strengthen its foothold in the electric vehicle (EV) market, increase battery technology development, and revamp its strategy in China to compete against fierce local competition. The report emphasizes Toyota’s commitment to flexible production, internalizing battery technology, and addressing unique demands in China, which remains the world's largest auto market.

Masahiro Yamamoto, Chief Officer of Accounting Division Group, gave a comprehensive outlook on Toyota's financial performance and projections for the fiscal year. He stated, “Toyota and Lexus vehicle sales are expected to reach 10.100 million units, 97.1% of the previous forecast. Electric vehicles will account for 46%.” Toyota remains poised for steady growth with a projected 46 trillion yen in sales revenue and a stable exchange rate assumption.

Consolidated Vehicle Sales. Courtesy of Toyota.

Strengthening battery technology through in-house production

Battery technology remains central to Toyota’s long-term electrification strategy. As Yoichi Miyazaki, Chief Financial Officer, emphasized, “Internalizing battery technologies will be an important key to advancing the widespread use of our electrified vehicles.” By producing ternary lithium, lithium-ion phosphate, and all-solid-state batteries in-house, Toyota aims to develop optimal battery solutions tailored to various applications.

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Miyazaki highlighted Toyota’s commitment to flexible production systems that enable seamless adaptation between battery electric vehicles (BEVs) and plug-in hybrids— a strategic move to strengthen Toyota’s competitive edge in a rapidly evolving market. He noted that Toyota aims to meet diverse customer demands more effectively by ensuring “higher production efficiency” and maximizing common usage across vehicle types.

Navigating the Chinese market with a localized approach

The Chinese market remains a focal point for Toyota, which has faced challenges from local electric vehicle giants like BYD. China, the world’s largest auto market, presents unique challenges and opportunities for Toyota. Despite initial setbacks, Toyota’s resilience in China has allowed it to maintain profitability and competitive positioning. With a target of producing 2.5 million vehicles annually in China by 2030, Toyota plans to adapt to local consumer preferences by deepening partnerships and transferring more development responsibility to China-based teams.

In response to an analyst's question about Toyota's evolving strategy in China, Miyazaki explained, “Running up to September, our sales were about 90% of the previous year… but now, compared to Chinese domestic manufacturers, our level of profitability is on par with them.” He acknowledged the need to adapt to unique customer preferences in China, such as demand for comfort inside parked cars and interest in autonomous driving features, which reflects the distinct ways Chinese customers use their vehicles. This understanding has led Toyota to alter its mindset for a more localized approach.

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Miyazaki pointed out that Toyota is focused on reinforcing its dealership network, engaging customers, and maintaining its position in China amid fierce competition. “We came to understand that quite recently. It’s not the Japanese manufacturer making cars for Chinese, but probably it’ll be better to enable Chinese people to make better cars for Chinese consumers,” Miyazaki said, signaling a shift towards fostering more collaboration and innovation within its local partnerships. Last year, Toyota strengthened ties between its R&D center in Jiangsu and its two joint ventures, a move aimed at harnessing localized knowledge and speeding up product development.

This quarterly report highlights Toyota’s dual focus: bolstering its battery capabilities through in-house production and cementing its presence in the Chinese market by rethinking traditional strategies. With these efforts, Toyota aims to sustain growth in the EV sector and regain ground lost to local automakers, reflecting a commitment to adaptability and innovation in the face of evolving market demands.

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