Toyota Faces Production Decline Due to Certification Controversy and Pricing Battle
In June, Toyota experienced a significant drop in worldwide production for the fifth consecutive month. The decline was primarily attributed to a certification controversy in its home market and a heated pricing battle in China. Both of these factors have had a profound impact on the largest automobile manufacturer in Japan.
The global production of Toyota dropped by 12.9%, reaching 795,862 units, marking the most significant decrease since December 2022. The certification controversy emerged when the transport ministry discovered inconsistencies in applications submitted by Toyota and other automakers to certify specific models. As a result, Toyota’s domestic market production plummeted by 18.8%.
This certification issue is part of a broader controversy surrounding automobile safety. Toyota’s reputation took a hit as a result of this development, further contributing to the decline in production. However, it is important to note that Toyota is scheduled to release its financial results for the first quarter soon, and analysts anticipate a 21% increase in operating profit from the previous year.
China, a crucial market for Toyota, has also played a significant role in the production decline. The automaker saw a reduction of 21.7% in production in China, where Chinese electric car manufacturers like BYD aggressively lowered prices to gain market share. This is the sixth consecutive month that Toyota’s output in China has decreased by 20% or more. Sales in China, along with those in Japan, were the primary contributors to the 5.1% drop in Toyota’s global sales during the month.
Furthermore, Toyota faced challenges in North America and Europe. Due to fewer working days compared to the previous year, output in North America decreased by 6.2%, while production in Europe decreased by 6.6%. However, despite these setbacks, Toyota has seen healthy demand for hybrid cars in the United States, and analysts anticipate a positive financial outlook for the automaker in the upcoming quarter.
In the first half of this year, Toyota experienced a 5% decline in global production and a 0.9% decrease in global sales. These numbers include sales and production figures for the upscale Lexus brand. While the current production decline is a cause for concern, Toyota’s financial results and the strong demand for hybrid cars provide a glimmer of hope for the future.
Overall, Toyota’s production decline can be attributed to a combination of factors, including the certification controversy in its home market and the intense pricing battle in China. However, the automaker remains resilient and is actively working to overcome these challenges, with hopes of a brighter future ahead.
