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Car makers may find it too expensive a move to shift facilities out of China even if other countries offer incentives galore. (Bloomberg)
Car makers may find it too expensive a move to shift facilities out of China even if other countries offer incentives galore. (Bloomberg)

Toyota rules out any prospect of taking Chinese facilities elsewhere: Report

  • Toyota has reportedly clarified in a statement that it has no plans of changing its strategy in China.
  • The Japanese government is offering subsidies to companies who may want to ship out of China and open more facilities here.

At a time when there is growing suspicion that multi-national companies could wrap up their facilities in China due to the fallout caused by Covid-19 pandemic, Toyota Motor Co has expressly denied having any such plans due to the costs involved.

(Also read: World's two biggest car makers brace for tumultuous 2020)

The Covid-19 pandemic, believed to have originated in a wet market in the Chinese city of Wuhan, resulted in massive disruptions in the country which had ramifications which are being felt around the world till date. The global auto industry felt the pain in particular because China is both the world's largest auto market and the world's largest auto manufacturer. Parts made here are shipped the world over but when China took aggressive measures to contain the virus, supply chains in many countries were hit, prompting speculation that auto makers would eventually look at reducing their reliance on facilities in the country.

Toyota, however, has no such plans.

In a statement issued recently, the Japanese car maker has denied any plans of moving out of China in the times to come. This despite the Japanese government offering attractive subsidies to companies that come calling out of China, or elsewhere. "Toyota has no plans to change our strategy in China or Asia due to the current situation. The auto industry uses a lot of suppliers and operates a vast supply chain and it would be impossible to just switch in an instant. We understand the (Japanese) government’s position, but we have no plans to change our production," Toyota said in its official statement, according to This Week in Asia.

Relocating out of China could also involve significant costs, something Toyota and major auto manufacturers struggling from present challenges would look at avoiding. Reuters recently reported that Toyota is expecting profit to drop by 80% to its lowest in nine years. The company is expected to take a mammoth 1.5 trillion yen ($13.95 billion) hit from a fall in global vehicle sales this year. (Full report here)

While it may still be too early to predict if or not other major car makers would look at shifting facilities out of China, industry experts highlight how the country will remain extremely relevant for them as they look at getting their respective global sales numbers to bounce back. Add to it the cost of shifting and it could well turn out to be an additional hassle not many would want to take.

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