By on September 25, 2018

2016 Toyota Prius Four - Image: Toyota

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]

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

  • avatar

    What about China anger for Japanese atrocities at WWII?

    • 0 avatar

      Well it’s just two minutes of hate for Oceania. The grievances of intra-Eastasia history can be ignored for the time being until next party directive.

    • 0 avatar

      Liberals are now trying to paint the Japanese as “victims” prior to WWII. The evil Americans were starving them of oil, blah, blah, blah. Japanese atrocities from Nanking to Unit 731 made the Nazis look like Boy Scouts. The Japanese were some sick puppies. Liberals also like to tout the evils of internment camps, never mind that it wasn’t guaranteed we’d win the war at that point, even though they came about with a Democratic POTUS and Congress. Two years later they were upheld by a liberal Supreme Court as well. However, the Chinese shouldn’t throw stones considering their activities since the war, which are now being abetted by companies like Google. Donaldus Maximus will bring them to their senses.

      • 0 avatar

        Seems “liberals” make you angry. Root of all evil in your mind I would suppose.

      • 0 avatar

        Stop spreading falsehoods.

        If anything, it’s the liberals who are harder on a conservative, militaristic, uber-nationalist regime (not to mention all the atrocities) that ruled Japan during WWII and its empire-building/expansionist years.

        And it’s the right-wingers/conservatives in Japan who portray Japan as the “victim” of US “aggression” and the dropping of atomic bombs (when the Tojo-govt. was fully willing to absorb the losses of civilian lives, which is why they didn’t surrender after Hiroshima, and why it was actually the entry of the Soviet Union into the Pacific theater which pushed Hirohito to surrender on US terms), along w/ totally whitewashing Japanese atrocities.

        This is done not only in museums in Japan, but in school textbooks approved/promoted by the Japanese govt.

        The right-wingers/conservatives here have done similar things when it has come to history text-books in states like Texas and Kansas (Texas being particularly important as it holds a lot of sway over school book publishers).

        • 0 avatar

          Liberals supported Soviet Union and sold out secrets of Atomic bomb to Stalin for free – they did it for ideological reasons not for money. People were risking their lives for love of communism in US and England. I will never understand that.

          • 0 avatar

            Fields are always greener where you can’t see them. But there is one thing though back then:
            USA: only for whites
            USSR: all races and colors are welcome.
            This and other things may be the reason. But Americans who believed in these ideas didn’t realize the totalitarian regime that grew out of it.

          • 0 avatar

            @slavuta You are projecting back modern leftie race sensibilities. Back then it was about socialism and workers, class warfare. Soviet Union was a dream come true for the Western Intelligentsia but otherwise they were racists by modern standards. Almost all of them were Jews. Soviet Union was an antisemit country by then.

            But nobody spied for Western countries voluntarily.

  • avatar

    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.

    • 0 avatar

      This. What’s telling is every single past Democratic president and most of democratic party candidate in the last 25 years and their economic advisors have droned on and on about China’s unfair trade practices, intellectual property thefts, currency manipulation, etc, and where did they go with it? Nowhere. If one doesn’t believe me, go watch some of the Candidate Obama’s speeches when campaigning in the midwest.

      Meanwhile one president does something and all the luminaries are screaming “well that’s not how we should do it”. Easy to say others are wrong when one never did anything at all.

    • 0 avatar

      “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.

  • avatar
    Peter Gazis

    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.

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