(JW Insights) Apr 19 -- Toyota and other Japanese carmakers are suffering the sharpest sales decline in China among foreign brands as analysts warn that their slow rollout of electric vehicles is threatening their future in the world’s largest auto market, reported Financial Times on April 18.

Year-on-year sales volume for the Japanese brands in China are down 32 per cent in the first three months of this year, according to research company MarkLines. That compares with 9 per cent falls for both German and US groups and a 7 per cent slide for Korean automakers.

A price war sparked by Elon Musk’s Tesla has also hit European and US carmakers at a time when passenger car sales in China are falling as a result of sluggish economic growth.

But the slowdown has been particularly brutal for Japanese brands — Toyota’s sales declined in the country for the first time in a decade last year, according to Financial Times .

The sharp fall-off in sales poses a daunting challenge for Toyota, the world’s largest carmaker, which has been slower than rivals to pivot towards electric cars. The automaker has argued that not every country will be able to accommodate EVs because of electricity constraints and affordability and has bet on its hybrid models.

“There are clear signals that Toyota is at a tipping point,” said Tang Jin, a senior research officer at Mizuho Bank in Tokyo. He estimates Toyota’s market share in China to be 8 per cent, lagging behind VW’s 14 per cent and GM’s 10 per cent.

“Last year was a watershed moment for China where the new energy vehicle market accounted for 25 per cent,” said Tang, referring to the category which includes plug-in hybrids, pure battery and hydrogen-powered cars.

Toyota is unveiling two new models from its electric bZ series at the Shanghai auto show this week. The automaker had said earlier in April that two locally-developed models would be launched in China next year.

In March, Toyota’s year-on-year sales in China dropped 19 per cent. Honda also reported a 19 per cent fall and sales at Nissan were down 25 per cent. The slowdown was accelerated by the removal of Beijing’s generous tax cuts on combustion engine cars in December.

“The buying frenzy has slowed down in China,” a Toyota executive said at a news conference in February. “Although Covid restrictions have been lifted, we are currently not optimistic about the market.”

Despite its reluctance to go “all-in” on electric vehicles, Toyota has attempted to accelerate its electric shift in China.

In 2019, the Japanese group signed deals with Chinese battery giant CATL to develop batteries for electrified vehicles. It also partnered with BYD, China’s largest electric and hybrid carmaker, on the sedan bZ3, its second mass-produced electric model in China expected to be launched this year.

Analysts said one of the main challenges for Japanese carmakers is whether they can maintain their prices and profitability as Tesla and BYD intensify their price war, according to the report from Financial Times.

(Gao J)