China remains to be the world’s largest auto market. In 2014, the Chinese purchased approximately 2.7 bmillion more motor vehicles than American consumers. However, since China became number one, their growth has yet to slow down. The expected growth for 2015 is around nine percent from last year.
After a nearly three year pause, Toyota is looking to expand their production facilities by building a new plant in China. They are allotting around $1.25 billion to new plants in China and Mexico, which will be scheduled to open around 2018. In recent years, Toyota has developed multiple new technologies that company President, Akio Toyoda, says could cut factory investment by forty percent.
Toyoda stated in an interview, “We are gradually starting to witness the next stage for new plants… make our plants competitive, instead of merely pursuing volume.” Toyota has been recovering from over-investing in new factories during the early 2000s. They are hoping that the new equipment will put them back on track; enabling them to regain the multiple customers they lost to companies such as Volkswagen during their “willful pause.”
One of the examples in new technology is manufacturing lines. The lines are capable of converting in minimal hours for changes in demand for a variety of models. These would be implemented in the plants in Mexico and China. Toyota’s greatest challenger is Volkswagen so hopefully their gains in technology will pay off.
As incomes rise, car sales grow even faster. Part is that they are elastic “normal” goods, ε > 1. Part is a stock adjustment effect: because cars are durable goods, new purchasers currently dominate used purchases, whereas in a mature market an increase in demand for vehicles can be met by keeping cars longer. There’s also a base effect: if you start from zero, the growth rate can be very high.
So where is Toyota in this process? Are their sales in China doing well? Do they continue to suffer from anti-Japanese campaigns?
Yes, on a global basis VW is their closest rival in total sales, but in China it is GM that holds the top alongside VW. I’m not sure Toyota was even in 3rd place — I’ve not looked recently.