Japan’s Toyota Motor (NYSE:TM) informed its dealers about the extension of a production reduction plan at one of its joint ventures in China. This decision comes as the company confronts escalating competition in the region.
The initial plan, set for October and November, will now be prolonged for an additional three months. The extension was communicated in a letter by Toyota's joint venture with China's state-owned FAW Group, with an aim to ease inventory pressure on dealers and ensure they can operate well in the "severe market environment".
"Production from December to February next year will continue to be reduced by a large amount," FAW Toyota said in the letter.
As a result of the slowdown, Toyota dealers can anticipate a reduction in car sales by 66,000 units in December, 60,000 units in January, and 38,000 units in February.
Toyota has, so far, avoided the kind of setbacks other Japanese automakers like as Nissan (OTC:NSANY) and Honda (NYSE:HMC) have taken in China from the shift to EVs and the rise of domestic brands. However, the automaker still faces pressure in the market.
Chinese competitors like BYD (SZ:002594) have been expanding their market presence, offering competitive prices for plug-in hybrids and fully electric vehicles.
Additionally, in July, Toyota terminated the contracts of roughly 1,000 dispatch workers prematurely at its joint venture with Guangzhou Automobile Group due to production constraints.
According to data from the China Association of Automobile Manufacturers, Toyota, currently holding the third position in terms of sales after BYD and Volkswagen (ETR:VOWG_p) in China, sold 1.265 million cars to dealers in the first nine months. This figure represents a 9% decline compared to the corresponding period the previous year.
BYD's sales rose more than 60% in the same period.
Shares of TM are down 0.24% in mid-day trading on Tuesday.