By on May 21, 2019

While it’s difficult to muster sympathy for giant corporations, the trade war current raging between the United States and China has left many stuck in an industrial limbo. Automakers want a bigger slice of the global market, but putting your eggs in either country’s basket will result in repercussions from the other.

We’re not saying this to promote some kind of commiseration for multinational companies; rather, it’s simply to remind everyone of how the auto industry has to conduct its business. Frequently, carmakers must play both sides. Toyota, already one of the world’s largest automakers, knows this better than anyone, and new documents shed light on some of the cloak-and-dagger aspects of maintaining its high-volume position. 

Toyota currently holds a 14-percent share of the U.S. auto market. In China, the breakdown is closer to 5 percent, with the automaker losing ground to rival manufacturers based in Europe and North America. Due to the seemingly vast growth potential of the Chinese market, most automakers will do anything to get a little extra love from the country. But, as Meatloaf has repeatedly explained over the speakers of many a late-night dive, there is one thing they won’t do — and that’s screwing themselves out of the U.S.

Toyota is no different. U.S. buyers have been kind to the company, helping keep the factory lights on. But China represents an important opportunity to grow sales, and it can’t sit idly by. According to internal documents uncovered by Reuters, Toyota has hatched a plan on how to effectively play both sides.

“For Toyota to operate globally, we need to strike a fine balance between China and the United States,” President Akio Toyoda was quoted as saying in a March 19th meeting transcript. “It’s imperative to avoid making enemies.”

From Reuters:

According to the April 23 minutes, the Japanese automaker is making what one unnamed senior executive described as a “significant move to steer its focus to China” — a market where it is far behind industry leaders Volkswagen AG and General Motors Co.

Toyota declined to comment on its internal meetings.

Its pivot to China — one that many other global automakers are also making — has been made easier by a thaw in ties between China and Japan but complicated by Trump’s trade policies.

Criticize those policies to your heart’s content, especially if you’re not an American, but note that they have encouraged certain automakers to make sizable investments in the country and avoid moving jobs beyond its borders. This was, again, the case for Toyota. Last week, the company announced $749 million in additional investments in U.S. manufacturing — helping bump its five-year investment plan (established in 2017) up to a spicy $13 billion.

However, while Toyoda has professed his personal love for America in the past, the company does hold a few grievances. Chief among them is the Trump administration’s belief that some imported vehicles and parts pose a national security threat to the United States. The threat of a 25-percent import tax looms. Toyota, uncharacteristically, responded with condemnation, saying it sent the wrong message and calling it “a major set-back for American consumers, workers and the auto industry.”

“I just don’t understand why we are called a national security threat and it pains my heart,” Toyoda said after Toyota’s latest U.S. investment announcement. “One thing I would promise, no matter what direction the discussion takes us is that Toyota will not leave America.”

It also doesn’t want to abandon China. Toyota recently said it would establish a green (see: EV-focused) research institute with Tsinghua University and furnish the state-owned BAIC Group’s Foton unit with fuel-cell technology for public transport. According to the leaked documents, the company didn’t feel comfortable making the announcement before appeasing the United States with fresh investments.

Rumors and unnamed insider sources say Toyota hopes to improve Chinese sales by 10 percent annually over the next few years. Easier said than done; according to a 2017 poll from the BBC World Service, mainland Chinese residents hold the greatest anti-Japanese sentiment in the world, with 75 percent of Chinese respondents viewing Japan’s influence negatively. The United States fared slightly better at 61 percent.

We’ve already seen how anti-Korean sentiment hampered Hyundai and Kia auto sales within the region, so it’s reasonable to assume the Japanese would face similar headwinds — making it all the more important that Toyota carefully consider its global business decisions. China is an opportunity that’s too good for most automakers to pass up, and yet it’s also a quagmire of financial risk. That said, the most serious risk facing manufacturers could be not investing in the region at all.

[Image: Joerg Huettenhoelscher/Shutterstock]

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24 Comments on “Playing Both Sides: How Toyota Is Rolling With the Trade War Punches...”

  • avatar

    It’s a no-brainer – keep the presence in the US market, and fully withdraw from the Chinese market. China will eventually nationalize its auto industry, leaving those “joint venture” suckers who have set up shop there high and dry.

  • avatar

    “Frequently, carmakers must play both sides.” Auto manufacturers play this game all the time. Sometimes it is with government over various regulations and sometimes with changing exchange rates between countries. The side left out of the play and holds the short end of the stick is the end purchaser of the product. Nothing really new here. Automakers play the both sides game to make money and they surely will regardless.

  • avatar

    This is obviously a silly point to make to pretend to be “offended” on the reasoning for tariffs and national security. More virtue signaling. Especially since the trade war has not singled out Japan. This administration has never actually said we consider Japan to not be anything but an ally.

    But China is a national security threat. I know “orange man is bad!” seems to be the only thing that matters, to the point many Americans now actually want China to rip us off. they want lopsided trade deals, ripping off our I.P., spying on us, etc all because they are so afraid Trump may get a win here.

    China is a hostile presence, even the most Senior Democrat Chuck Schumer is saying he supports Trump on his trade stance. I’m old enough to remember when the “smart” way to engage enemies on the world stage was through economic warfare instead of actual warfare. I’m also old enough to remember when the default Democrat position was protecting working class Americans from unfair trade practices. I guess it was just always talk, but they always cashed the union checks.

    • 0 avatar

      Why don’t we just ban US made automobile export to China? Problem solved.

      • 0 avatar

        Or we could just levy a tariff on Chinese goods? Like a sales tax. Instead of pretending the sky is falling.

        China needs needs the US a lot more than the US needs China.

        • 0 avatar

          Crosley, I agree with “we could just levy a tariff on Chinese goods? Like a sales tax. Instead of pretending the sky is falling.”

          Ideally, America and its trading partners would have free and equitable trade among themselves, without levying tariffs. But such is not the case.

          So I am a proponent of levying the same tariffs and taxes on goods we import as other nations place on the goods they import from the US.

    • 0 avatar

      China is a socialist country (or communist since communist party still rules). Thats the reason why American liberals admire China (and European countries too which are formally social-democracies in revisionist post Marxist sense). Actually USA may be the only remaining non-socialist country in the world and also world’s policeman that is why left hates US.

      • 0 avatar

        I never remember asking for a world policeman. In fact, we could do without the US stamping around with big boots on illegally invading countries who couldn’t summon a flotilla of row boats to invade the US in return. The biggest pack of BS ever floated is this BS about national security threats to all you hypnotized flag-waving Americans.

        If the US wants to stay at home and make its own consumer goods and exclude imports, I’m fine with that. Just so long as you lot stay there and mind your own business.

        Not everyone thinks the way the US is run needs exporting – in fact, I’d guess there’s not a “sovereign” country that does. All countries have traditions and don’t need someone telling them they need to pay fealty to the biggest bully in the world while swallowing Micky D cardboard “burgers”. You make the biggest error of all if you think people want to invade and take the place over, but because you think you live in heaven on earth, you’re convinced that’s what everyone else wants to do. Rubbish.

        Capitalist jingoism, inability to distinguish between socialism and social democracy and totalitarian, we get it daily from twits on TTAC. Explains why everyone groans when Americans enter the room – just what we need, the bigheads have arrived.

        • 0 avatar

          So you’d rather more Chinese influence? I suppose to you’d also like restrictions on what can be freely said in public too? Americans are fine in my book and I’ve met plenty of good ones down under as well as in the middle east. Your comment reminds me of an idiot girl from high school saying that the “Americans deserved it”. That was the morning after 9/11.

        • 0 avatar

          Conundrum— I must allow you your aggression and idealistic argument. Every human deserves that respect and autonomy.

          That said— I’ll condemn every ism you’ve levied at Americans as the transference and jealousy they are.

          If you are happy about the East’s consumption of the West’s cultural legacy— wholesale consumption (Check your art auctions to evidence)— you’ve lost the plot all-together. What’s old is new again.

          I, personally, do not wish to be placed in a human zoo such that newly-minted Victorianesque Chinese dandies can study my differences. Again— we’ve been there. Done that. That really is where this ends if we aren’t pig-headed now.

          And… we Americans have elected the biggest pig available to speak for us. Its disgusting, but effective.

          Again— it doesn’t evidence any ism to have a strong identity or differing viewpoints. It isn’t an ism or combatant to protect one’s own culture against consumption, undue influence— those are called existential threats, and in this case— they’re real, not perceived.

          You do you. We’ll do us.

          Come talk when you can appreciate that for us.

        • 0 avatar

          “If the US wants to stay at home and make its own consumer goods and exclude imports, I’m fine with that.”

          I agree, but the way our tax laws are written, it is more advantageous to have the status quo. That’s how we got here, because of our tax laws.

      • 0 avatar

        China hasn’t been socialist since the 80s. America has more socialist programs in place than China does. China is more appropriately considered to be an authoritarian capitalist state.

    • 0 avatar

      toyota has never been a “national security threat”, nor has any other car company that exports more cars MADE HERE (honda, toyota, MB, BMW) than they import from their home country. hes just got a stick up his butt about german cars, for some senile reason. hes also too stupid to know what goes around, comes around.

  • avatar

    US has an export restriction on encryption technologies, and has been like this for at least 20 years. So what happen then? Everyone develop their encryption technologies in Israel.

    Yup, you can bet your ass that every technologies that gets banned for export to China will get developed back in Japan or Europe, and then “import” into the US.

  • avatar

    In US Japanese cars are much more popular with Chinese immigrants than American and even European cars. So I hardly believe that Chinese have anti-Japanese sentiments. It must be something else.

  • avatar
    Jeff S

    Not just Chinese immigrants but most immigrants. Most want a reliable car and the Japanese have a reputation for reliable vehicles.

  • avatar
    Peter Gazis

    In the U.S./Canada Toyota builds: Camry, Avalon, Highlander, Sienna, Sequoia, Tundra, Lexus ES
    some: RAV4s, Corollas & Lexus RXes and a few Tacomas.
    Mexico builds: Yaris and most Tacoma’s
    They Import; Lexus IS, RC, GS, LS, LC, UX, NX, GX, LX; Toyota: Land Cruiser, 4Runner, C-HR, Supra, Prius, PriusPrime, Mirai, 86
    also about 50% of Corollas; 40% of RAV4s;
    With plans to move:
    – Lexus RXhybrid & RXL production to Canada
    – Rav4hybrid production to Georgetown KY
    – add Tacoma production to Mexican factory due to open late this year
    – in 2021 build Corollas in Huntsville AL

    • 0 avatar
      Peter Gazis

      Toyota is already scrambling to keep up with the rapidly changing vehicle market in the U.S. With so many vehicles being built outside North America Tariffs would hit the company hard.

  • avatar
    Jeff S

    True, Toyota has invested a lot in their North American plants and they make many of their vehicles in the US. It is understandable Toyota’s position they are in the middle of a trade war between the US and China.

  • avatar

    As long as Toyota continues to meticulously build better cars for better prices than others, they’ll do fine.

    Building a “brand” in China to rival what they have in the US, will probably never be in the cards. Everyone is just too good at building reliable cars now; as opposed to back when non Japanese branded cars tended to fall apart annoyingly often. And the Chinese aren’t exactly predisposed to favor Japanese anything, for both historical, and current political, reasons.

    But still, Chinese consumers aren’t all that different from anyone else. Good products, for good prices, sell.

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