Toyota is expected to announce a three-year halt in any new plant projects. Jiji Press reports that the strategy, a dramatic turn from its latest expansion efforts, is part of a new business plan that will be unveiled in the next few months.
Japanese daily the Nikkei reports that the new approach will see Toyota focus its capital investment on existing factories. Under the new business plan, all plans for establishing new facilities, other than those already announced, will be put on hold.
A spokesman for the company has told Automotive World: “Although we are taking various measures to balance between strengthening short-term profitability and mid-long term sustainable growth, we cannot comment on our future business (investment) plans.” He goes on to explain that the company remains “interested in growth in the future, and our focus will be on improving our investment efficiency to make sure that our growth will be sustainable.”

Kevin Tynan, an automotive analyst at Bloomberg Industries, is quoted by Bloomberg as stating that the decision marks an effort by the OEM to address its reputation in terms of quality: Toyota isn’t chasing short-term profitability,” he is quoted as stating. “They’ve made a conscious decision not to move quickly to set up factories in low-cost production countries like Mexico. It’s more important to them to keep tight control of quality over the long term.”
Toyota recently announced a deal to source vehicles from Mazda’s upcoming plant in Salamanca, Mexico, as opposed to setting up a local unit itself. However, Toyota has announced a number of new plant projects in the past year, including plans for a new vehicle plant in Thailand, an engine plant in Indonesia, an engine facility in São Paulo, Brazil, as well as numerous expansions at existing facilities. Toyota already operates nearly 30 plants in its home market and about 50 outside of Japan.
As Bloomberg’s Tynan notes, quality has been a big concern lately. The OEM has recently been hit by considerable expenses related to previous recalls in the US. It is taking a one-time US$1.1bn pre-tax charge against earnings to cover the estimated costs of an economic loss settlement and possible resolution costs of civil lawsuits in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from previous recalls.
Toyota expects its global sales this year to rise 2% from last year to 9,910,000 units. Its global production, however, it expects to remain flat at 9,940,000 compared to the 9,920,000 units it built this year. This past year has seen a considerable rise in output across the Toyota, Hino and Daihatsu brands, with global production up 26%, 18% and 74% respectively. While last year Toyota’s total domestic production rose 27% and overseas output rose 26%, this year domestic production is forecast to fall 10%, with overseas production growth slowing to 8%.
In December, the Asahi Shimbun reported that Toyota had postponed construction of a new plant in Tianjin, China, and was considering delaying the construction of another new plant in Guangzhou. This was not particularly surprising, considering the dramatic hit to its sales in China following the China-Japan land dispute that sparked a rise of anti-Japanese sentiment. In September, Toyota’s sales in China plunged nearly 50%, followed by a 44% fall in October, a 22% drop in November and a 17% fall in December. As the figures show, demand is slowly starting to recover, in part due to the use of generous incentives.
The value of the yen also remains a considerable challenge for Toyota, along with its compatriots. In response to the considerable rise in value of the local currency, most Japanese OEMs have lifted investment in overseas assembly. While for some this has involved a ‘hollowing out’ of Japanese production, Toyota has resisted the move more than some of its compatriots and thus remains more sensitive to the yen’s fluctuations. While the currency’s recent weakening has been welcomed by the country’s vehicle manufacturers, they are all emphasising that this needs to advance much further. Toyota President Akio Toyoda recently commented: “It is wrong to say the yen is weak. The yen is still super strong at the current level.”
Megan Lampinen