A U.S.-launched Trade Dispute Is Helping Toyota in One Key Market, but for How Long?

While the trade situation is still very much in flux, Toyota sees itself as standing to gain from the turmoil, just not in the United States. The automaker, along with other Japanese brands, finds itself in an advantageous position in China — a massive market facing its own troubles.

China’s anger at the U.S., and vice versa, could mean big bucks in the short term for Toyota.

According to the Financial Times, Toyota sees China as a big opportunity, and wants to capitalize on the current trade situation. In early summer, in response to tariffs levelled by the U.S., China slapped new tariffs on top of the ones it already applied to imported American cars. At the same time, it lowered tariffs on vehicles brought in from other countries, including Japan.

Toyota performs much of its manufacturing in Japan, and all of the Lexus-branded vehicle it sells in China arise from its home country. As the tariffs translated into higher prices for many U.S. luxury cars sold in that market, Lexus sales skyrocketed in August. The brand’s Chinese sales rose 59 percent, year over year, last month, setting a new monthly record.

Despite a three-month downturn in Chinese auto sales sparked by the trade tiff, Toyota recorded a 23 percent year-over-year sales increase in August. Compare that to Ford Motor Company’s 36-percent drop.

“It’s inevitable for Toyota to shift to China with a sharp slowdown in the US,” Masahiro Akita, analyst at Credit Suisse, told FT. “It’s also perfect for Toyota since it will help them to maintain their commitment to producing 3m vehicles in Japan.”

Last month, Reuters reported that Toyota planned to boost its Chinese automotive production by 20 percent, or another 240,000 vehicles per year. The automaker has assembly plants in Tianjin and Guangzhou, building 1.16 million vehicles per year. Increased state subsidies for electric vehicles and the country’s promise to relax, then eliminate, rules on foreign ownership has Toyota seeing green.

While much of China’s energy goes into building (and talking up) electric vehicles, it remains interested in hybrid technology — something Toyota knows much about. Sources tell FT that the country wants the maker of the Prius to share its technological prowess in that field.

Of course, there’s many ways this situation can turn sour for Toyota. China’s economy could tank, leaving fewer buyers for Toyota’s vehicles, or the U.S. could levy new tariffs on Japan, throwing its North American operations into chaos. Over the first eight months of 2018, Toyota Motor Corp. sales in the U.S. rose 1 percent, to 1,621,137 vehicles.

[Image: Toyota]