Toyota adjusted its strategy in China, and Toyota's plants in the north and south reduced production

Late LatePost

2024-04-26 18:20Posted on the official account of Beijing LatePost

The fuel vehicle market continues to shrink, and Japanese brands, which have been selling well in China for nearly 20 years, have reached a watershed in sales.

Text丨Hong Hanqi

Editor丨Song Wei

On March 21, the third production line of FAW Toyota's TEDA plant went on vacation due to the plant's construction plan. The holiday lasted a month, and several plant employees said that the third-tier plant plans to resume work around April 23.

More than a month's vacation, which is rare in the TEDA factory. The 21-year-old TEDA plant is the largest production base of Tianjin FAW Toyota, and FAW Toyota's best-selling models such as Vios, Crown, Ruizhi and Corolla have been put into production here.

In 2022, the TEDA base will have a vehicle production capacity of 620,000 units, accounting for 66% of FAW Toyota's total vehicle production capacity. However, in 2023, the annual production capacity of the TEDA plant will be about 204,000 units, which is only 1/3 of the previous year.

The background is the declining share of gasoline vehicles in China's auto market.

At the beginning of 2023, the second production line of the TEDA plant was rumored to be sold to BYD. Previously, BYD and Toyota established a joint venture to jointly develop pure electric models. Although FAW Toyota denied this, it confirmed that the second production line would be temporarily shut down in May of the same year, and the shutdown period would last for a year and a half.

As a result, in the past year, the personnel of TEDA's 2nd production line have been successively transferred to TEDA's 3rd production line, Xinyi factory, new energy plant and Chengdu factory. In April 2023, FAW Toyota Vios officially discontinued. Today, there are only two models left in the TEDA plant: the Corolla and the Asiatic Lion.

The decline in the production capacity of the TEDA plant is due to the shutdown of some production lines on the one hand, and the voluntary downward adjustment of FAW Toyota according to market supply and demand on the other hand.

In November 2023, FAW Toyota said in a letter to dealer partners that FAW Toyota continued to significantly reduce production between December 2023 and February 2024, on top of the significant cuts in production capacity already in October and November, given the high pressure on dealer inventories.

An employee of the TEDA factory said that in March, the third production line produced about 300 units per day in a single shift. Compared with 2020, the TEDA plant has a daily output of 2,000 units under the condition of double shift production of two production lines, which is close to the standard production capacity of the TEDA factory.

The small talk between workers has changed from complaining about overtime to rushing production capacity in the past to worrying about whether the third production line will follow in the footsteps of the second production line.

GAC Toyota also experienced production cuts. From January to March 2024, GAC Toyota's monthly production capacity fell three times in a row, with a cumulative production capacity of 166,300 units, a year-on-year decrease of 23.31%.

According to media reports in March, Nissan and Honda are planning to reduce the production capacity of their joint venture plant in China, with Nissan planning to reduce production capacity by 30% and Honda planning to reduce production capacity by 20%.

Behind the reduction in production capacity is the continuous decline in sales of Japanese cars represented by Toyota Motor Corporation in the past year. According to the statistics of the Passenger Car Association, the cumulative retail sales of the Japanese car market in 2023 will be 3.694 million units, a year-on-year decrease of 9.9%. In March this year, the market share of Japanese cars was 13.8%, and at its peak, it was 30%.

The market for fuel vehicles continues to shrink, especially the A-segment market, where joint venture brands used to dominate, is rapidly being eaten away by new energy vehicles. Japanese brands, which have been selling well in the domestic market for nearly 20 years, have reached a watershed in sales.

Two players who quit the Million Club

In 2023, FAW Toyota's annual retail sales will be about 800,000 units, GAC Toyota's will be 901,000 units, and Toyota's cumulative sales in China will decline by about 12% year-on-year.

Previously, GAC Toyota has been growing its sales for 10 consecutive years, with annual sales spanning from 400,000 to 1 million units, and is the only member of the "Million Club" of Japanese joint ventures. FAW Toyota also maintained 8 years of continuous sales growth before its sales decline in 2022.

FAW Toyota has made a comeback in the past year, with sales up 4.1% year-on-year, making it the only joint venture brand, including FAW-Volkswagen, to achieve positive growth.

However, according to FAW Toyota's original plan, sales will reach 1 million units in 2023. In 2022, FAW Toyota hopes to rush from 860,000 to one million units, and in the end, it will only decline around 800,000 units.

FAW Toyota's "disappeared" 200,000 units, part of which was missing from the Corolla.

In the A-segment car market, Corolla has long occupied the top three sales in the domestic sedan market. Even in 2020, during the epidemic, the annual sales of the FAW Toyota Corolla family were more than 350,000 units, accounting for 45% of sales.

In FAW Toyota, Corolla's annual sales have accounted for more than half for a long time.

The situation has changed dramatically over the past two years. In 2022, the sales of plug-in hybrid models will pick up, and the growth rate will far exceed that of pure electric models, directly seizing the fuel vehicle segment.

From 2021 to 2023, the annual sales of Corolla will be 310,000 units, 250,000 units and 180,000 units, respectively. The top three in the sedan market in terms of annual sales are Lavida, Sylphy and Corolla, and changed hands to Sylphy, Lavida and Qin PLUS DM-i. From February to March this year, BYD launched a price war offensive of "oil is more expensive than electricity", and Qin PLUS DM-i squeezed out the Sylphy and won the sales championship in the sedan market for two consecutive months.

GAC Toyota's sales in 2022 rushed to 1 million units, but the decline in the segment is already visible. From 2021 to 2023, Leiling's annual sales will be 230,000 units, 195,000 units, and 114,000 units, respectively.

Camry, Leiling, Veranda, and Highlander are GAC Toyota's main sales models. Compared with FAW Toyota, GAC Toyota's sales structure is more balanced. The impact of a single product decline in the short term is relatively limited.

Taking 2022 as an example, although the sales of the Leiling series declined in the same year, the average monthly sales of the mid-size sedan "star" Camry exceeded 20,000 units, and the first full sales year after the launch of the Sena brought more than 70,000 sales, all of which drove GAC Toyota's sales growth.

However, at the same time, the penetration of new energy vehicles has accelerated in various market segments, and its reshaping of the market structure has taken place first in the SUV market.

The 2023 Highlander will cancel the pure fuel version and be fully hybrid, further amplifying Toyota's fuel economy advantages, and the price policy of 20,000 yuan will be synchronized with the launch. At the end of the market, the Highlander, which used to "sell cars at a higher price", has dropped 30,000 yuan for all officials.

However, under the offensive of the ideal L series, BYD Tang series and Wenjie, Highlander sold 73,000 units in 2013, falling back to the level of 2015. In the previous five years, Highlander's annual sales were 87,000 units, 108,000 units, 95,000 units, 98,000 units, and 101,000 units, respectively.

This year, the new product offensive and price war of new energy vehicles have spread to the mid-size car market of more than 200,000 yuan, which is the main attack area of Camry. Prior to this, the Camry had been continuously seized by models such as the Seal DM-i.

The ninth-generation Camry, which was launched in March, is GAC Toyota's most important new model this year. Judging from the data, Camry's monthly sales increased from 16,000 units in January to less than 7,000 units in February and March.

Toyota's strategic focus and route selection

Toyota Motor Co., Ltd. was the first car brand to introduce hybrid technology to the Chinese market. In the pure electric sector, Toyota's layout is slow.

Three years after the Volkswagen Group introduced the ID. series to the Chinese market, in 2022, Toyota launched the all-electric brand bZ, and successively launched two products, the bZ4X and bZ3.

In 2023, Toyota sold 11.23 million vehicles worldwide, with only 1% of pure electric models, and in the Chinese market, this figure is slightly higher, about 3%.

In terms of sales, the bZ series fell far short of Toyota's expectations. However, the shutdown of the pure electric vehicle business has not affected Toyota to continue to become the world's most profitable car company.

Previously, Toyota raised its net profit forecast for fiscal 2023 to 4.5 trillion yen, which is also the first time that Toyota's full-year net profit has exceeded 4 trillion yen.

Toyota has its own logic for electrification, and its electrification strategy includes not only BEVs (pure electric vehicles), but also PHEVs (plug-in hybrids) and FCEVs (fuel cells), as well as HEVs (hybrids) in the domestic market.

Akio Toyoda believes that the global sales of pure electric models will not exceed 30%. Since last year, Toyota has accelerated the implementation of the latest generation of hybrid technology, which has been applied to models such as Leiling, Fenglanda, and the ninth-generation Camry. In 2023, Toyota's electrified models (including gasoline-electric hybrid models) will account for more than one-third of the Chinese market.

For the BEV business, Toyota seems to be more concerned about cost control than expanding its market share.

According to media reports, Toyota is considering adopting a new production technology, integrated die-casting, on its battery electric vehicles to be launched in 2026, and adopting a self-propelled assembly method for vehicles without conveyor belts. These two production methods will help Toyota reduce its production process and plant investment by half.

The high cost of battery batteries for pure electric vehicles makes it more difficult to make a profit than gasoline vehicles. Toyota believes that BEVs need to be produced in a lower-cost way.

In response to the increasing penetration rate of pure electric vehicles in China's auto market, Toyota has also made appropriate adjustments. For example, delegating power to the joint venture partner to lead the development of pure electric products.

This has become a common practice for multinational car companies in the post-joint venture era: loosening the R&D authority that once firmly held the hands in their hands, and the joint venture company or even the Chinese partner enterprise is responsible for the R&D work. SAIC Volkswagen's R&D Center is leading the development of Audi brand PHEVs to launch new energy products for the Chinese market faster.

In April last year, Toyota President Tsuneji Sato said that two locally developed BEVs would be launched in the Chinese market in 2024. At the end of last year, GAC Toyota released the new energy brand Bozhi, and launched its first model, the Bozhi 4X, which is actually a facelifted model of the Toyota bZ4X.

This means that Toyota, whose pure electric business cannot keep up with the pace, has put its hopes on joint ventures until at least 2026.

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