Despite ambitious expansion plans, Toyota dealers are looking worried
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On the road to somewhereImage: Toyota Motor Corp missed its annual China sales target of 1.1m vehicles by a margin of some 700,000 units in 2014 and is expecting the pace of 2015 sales to slow by around 50% as well.
Despite the contraction, the world's largest car manufacturer is keen to ramp up production in China and Mexico.
Toyota has announced it will end its three-year expansion freeze and set up two vehicle assembly plants in China, based in Changchun and Gaungzhou, where it already produces cars, and in an undisclosed location in Mexico.
However, production increases could actually be offset when the company renovates some of its older plants and improves technology across assembly lines. The Japanese car giant already operates eight such lines in China.
Car dealers, however, are finding it hard to believe in a 6.8% rise in 2015 sales. Among the 523 registered Toyota dealers across China around 95% are losing money, according to China Automobile Dealers Association Deputy Secretary General Song Tao.
As many as 10% of all dealers, which operate under the state-backed association, are positioned to leave the FAW-Toyota network as their profitability is squeezed by waning sales and inventory backlogs.
The group had written to FAW-Toyota for 2.2bn yuan ($353m) in subsidies to help meet costs caused by stockpiling and unsold vehicle management. Some have claimed the FAW-Toyota joint venture had forced them to take on excess stock and reduced their ability to hit already unrealistic sales targets. The letter also called for flat targets for 2015 from 2014 levels.
Rising inventories have affected many carmakers and dealers in China as auto growth rose less than expected in 2014.