Toyota pursues plan to build plant in China, in talks for further expansion

Article by Andrew Christian, on April 27, 2015

Plans to build Toyota Motor Corp.’s new assembly facility in China in 2017 are already underway but the automaker is in further talks to increase its output even more. Toyota is considering an expansion in northern China, the site of its joint venture with FAW Group, to achieve annual sales of 2 million units, according to Hiroji Onishi, CEO of Toyota’s China business.

Last week, Toyota said that it aims to spend around 52.5 billion yen ($439 million) to boost production with Guangzhou Automobile Group Co. in 2017. At the Shanghai auto show, Onishi shared to reporters that talks with partners are ongoing about Toyota’s growth over the medium term but that no concrete decision has been made.

Work at the Guangzhou plant will mark the return of Toyota to expansion as it has frozen all major expenses in 2013 and hasn’t built a new assembly plant around the world since then. President Akio Toyoda sees the increasing demand for more cars from the existing plants and has signed off on the plan to raise production.

With this drive to boost its efficiency, Toyota has been able to post its second consecutive year of record profit. The automaker has had some difficult gaining traction in China but its earnings have been on the rise. The year 2014 marks the first time that it was able to sell 1 million units in the country, two years after expectations that it will hit the mark.

In the Chinese market, Toyota is each outsold by Volkswagen AG and General Motors by 3-to-1. As soon as Toyota starts to produce a yet-to-be-named model in 2017 in Guangzhou, Toyota will have a 1.1-million local output capacity. Volkswagen has set a goal to have the annual capacity to build 5 million vehicles in China by 2019.

The German automaker is actually on track to overtake Toyota as the top-selling automaker in the world this year.

Onishi said that since the latter half of 2014, market conditions in China have become less favourable due to the “new normal” policy orientation announced by the government. He told reporters that Toyota has no intention to stop or delay its goal to reach 2 million units but it will be closely monitoring the new normal conditions.

Topics: toyota, china, plant

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