toyota in china case study

• Work & Careers
• Life & Arts

Toyota’s rethink on China reflects new realities

To read this article for free register now.

Once registered, you can:

• Read free articles
• Get our Editor's Digest and other newsletters
• Follow topics and set up personalised events
• Access Alphaville: our popular markets and finance blog
• Global news & analysis
• Expert opinion
• Special features
• FirstFT newsletter
• Videos & Podcasts
• Android & iOS app
• FT Edit app
• 10 gift articles per month

Explore more offers.

Standard digital.

• FT Digital Edition

Premium Digital

Print + premium digital, ft professional, weekend print + standard digital, weekend print + premium digital.

Then $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.

• Global news & analysis
• Exclusive FT analysis
• FT App on Android & iOS
• FirstFT: the day's biggest stories
• 20+ curated newsletters
• Follow topics & set alerts with myFT
• FT Videos & Podcasts
• 20 monthly gift articles to share
• Lex: FT's flagship investment column
• 15+ Premium newsletters by leading experts
• FT Digital Edition: our digitised print edition
• Weekday Print Edition
• Videos & Podcasts
• Premium newsletters
• 10 additional gift articles per month
• FT Weekend Print delivery
• Everything in Standard Digital
• Everything in Premium Digital

Today's FT newspaper for easy reading on any device. This does not include ft.com or FT App access.

• 10 monthly gift articles to share
• Everything in Print
• Make and share highlights
• FT Workspace
• Markets data widget
• Subscription Manager
• Workflow integrations
• Occasional readers go free
• Volume discount

Essential digital access to quality FT journalism on any device. Pay a year upfront and save 20%.

Terms & Conditions apply

Explore our full range of subscriptions.

Why the ft.

See why over a million readers pay to read the Financial Times.

• China Daily PDF
• China Daily E-paper

Toyota faces electric challenge in China

With the ongoing 26th United Nations Climate Change Conference of the Parties (COP26) being held in Glasgow in the United Kingdom, where decisions will be made on reducing carbon emissions, the world's largest car company seems to be at odds with a sizable chunk of global opinion when it comes to electrification.

Japan's Toyota was an early adopter of hybrid electrification for its vehicles, innovating with the Prius model, but has fallen behind when it comes to full electric vehicles. The company's senior management have even made statements against going toward full electric.

At Toyota's annual meeting in January, CEO Akio Toyoda denounced the Japanese government's proposals to phase out gasoline-powered vehicles by the mid-2030s.

He claimed that electric vehicles produce more emissions than internal combustion engines.

He added that electric vehicles are too expensive and that the car industry would collapse if internal combustion engines were phased out.

The first point has been proved false by numerous studies. The second is somewhat correct, with the cost of mass-market electric vehicles significantly higher than comparable internal combustion models. But prices are coming down.

It has even been reported that the Japanese automaker has lobbied lawmakers in the United States to dissuade them from all-electric future.

More importantly, Toyota seems to be at war with itself. While its CEO attacks a market that is growing at a significant pace, it must invest in electrification to mitigate strategic risks.

Toyota has joint ventures with Panasonic and China's BYD, and is building a $1.2-billion electric vehicle manufacturing base in Tianjin. But its electrification pales in comparison to major rivals such as Volkswagen.

Could it be that Toyota is bitter because of all the money it invested in hydrogen fuel-cell technology, which has not captivated the market as it planned?

While hydrogen technology has been advanced by the Japanese carmaker in recent years, battery electric vehicles have improved at a faster rate across many metrics-efficiency, range, charging network, price and popularity.

But Toyota is making some effort, despite the grumblings of its CEO. The company claims that it will have 70 electric models by 2025.

Currently, it has three pure electric models on sale in China. Compared to rivals such as Tesla and Volkswagen, and Chinese brands such as BYD and GAC, Toyota is lagging far behind in the world's largest car market.

A total of 296,000 pure electric vehicles from all brands were sold in China in September alone.

Another danger for the Japanese marque is that it can't rely on its rich history of innovation and reliability.

A host of pure electric startups are following the charge of Tesla and are potentially hovering up the current and future market share of traditional manufacturers.

These startups are examples of how staying well-informed about the demands of the market can pay rich dividends.

It's not being said that hydrogen fuel-cell technology isn't an environmentally friendly and achievable solution for future mobility, it is.

But at the moment, pure electric is outperforming hydrogen and the marketplace has made its decision for now.

Toyota's mantra is to invite people to go on a journey: "Let's Go Places". However, if it doesn't react more quickly to the current climate for pure electric, the only places Toyota's customers will be going are to its competitors.

• More non-fossil fuel vehicles to hit road
• Electric vehicles power China's auto exports
• Top 10 automobile groups to attend CIIE together
• Auto industry prepares for challenging quarter
• Top 10 Influential Brands of 2021 in Asia

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

What Really Makes Toyota’s Production System Resilient

• Willy C. Shih

“Just-in-time” only works as part of a comprehensive suite of strategies.

Toyota has fared better than many of its competitors in riding out the supply chain disruptions of recent years. But focusing on how Toyota had stockpiled semiconductors and the problems of other manufacturers, some observers jumped to the conclusion that the era of the vaunted Toyota Production System was over. Not the case, say Toyota executives. TPS is alive and well and is a key reason Toyota has outperformed rivals.

The supply chain disruptions triggered by the Covid-19 pandemic caused major headaches for manufacturers around the world. Nowhere was this felt more acutely than in the auto industry, which faced severe shortages of semiconductor chips and other components. This led many people to argue that just-in-time and lean production methods were dead and being superseded by “just-in-case” stocking of more inventory.

• Willy C. Shih is a Baker Foundation Professor of Management Practice at Harvard Business School.

Partner Center