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

Steph Willems
by Steph Willems
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]

Steph Willems
Steph Willems

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  • John John on Sep 25, 2018

    What I got from this article is that China has Import Taxes, Vats, Displacement Taxes and a Final Sales Tax on imported products. China does this to incentivize manufacturers to produce their products domestically and provides refunds/incentives to export does products from their Chinese factories. And now they have raised does Taxes on imported American Luxury vehicles, and other goods after the USA raised reciprocal VAT's on Chinese made cars, steel, aluminum and other manufactured goods. This simply looks like China wants to keep the status quo, have Foreign markets open to Chinese made goods while keeping their domestic markets closed and and controlled.

    • See 1 previous
    • Ect Ect on Sep 25, 2018

      "What I got from this article is that China has Import Taxes, Vats, Displacement Taxes and a Final Sales Tax on imported products" John, you should go back and actually read the article. With the exception of tariffs, none of these items are mentioned at all. And all of them (except tariffs), if and to the extent they exist in China would apply to both foreign and domestic products, so would be trade -neutral. And it is not true that the US "USA raised reciprocal VAT’s on Chinese made cars, steel, aluminum and other manufactured goods". There is no VAT in the US. At all.

  • Peter Gazis Peter Gazis on Sep 25, 2018

    STOP THE PRESSES! Toyota has a good month in China. Bravo when TTAC sends a report card home, to be signed by Toyota's parents, there should be a gold star in the China sales row. In other news the Cleavland Browns won their first game in 2 years. Lets talk Superbowl.

  • Kat Laneaux @VoGhost - Not getting into politics. Let me say this though. I wouldn't trust Trump as far as I can throw him. His history precedes his actions and I am so not ok with it. The devil is the master of lies, unfortunately Trump is not far behind him. The guy is so desperate to stay in office, he might as well be Mussolini, or Putin. He just wants power and to be idolized. It's not about working for the people, he doesn't care about us. Put a camera on him and he wants the glory. As I said, his actions speak louder than words.
  • ToolGuy "Mr. President, no government agency, no think tank, and no polling firm knows more about the automobile customer than us. We talk to customers every day. As retail automotive dealerships, we are agnostic as to what we sell. Our business is to provide customers with vehicles that meet the needs of their budgets and lifestyles.”• How many lies can you fit into one paragraph?
  • Spamvw Three on the tree, even Generation X would have a hard time stealing one of those.
  • ToolGuy This trend of cyan wheels needs to end NOW.
  • Kwik_Shift Interesting nugget(s) of EV follies. https://x.com/WallStreetApes/status/1729212326237327708?s=20