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Toyota Builds New R&D Center In China While Enthusiasm Fades

Once again, we proudly bring you a report – this time from China – by Bertel Schmitt.

Toyota today broke ground for a new R&D Center in China. The center is in the TEDA free trade zone in the port city of Tianjin, where Toyota has a factory with its Chinese joint venture partner FAW. The center alone isn’t big news, even if it triggers “giving away know-how to the Chinese” knee jerks. Most OEMs engaged in China have R&D facilities in the Middle Kingdom, GM has a few.

No3The story is interesting for another aspect. Ever since last year’s anti-Japanese riots in China and the subsequent drastic drop of market share of Japanese auto brands in China, enthusiasm of Japanese automakers for the alleged growth market China has markedly cooled off. Last year’s riots caused bigger volume losses at Japanese carmakers than the tsunami and the Thai flood. Sales are slowly clawing back to former levels, but it is a rough and costly exercise.

方案一南侧(预留为草地)With a share of around 21 percent, Japanese-branded cars dominated the foreign-branded sector in China. This has changed. Buoyed by a new wave of nationalism, and by gain in quality and comfort, Chinese brands accounted for slightly over 4 million units in the first seven months of 2013, translating into 40.41% of the market. German-branded cars now hold 19.60% of the market, Americans 15.14%, Japanese 12.33%, Koreans 9.12% and French 3.17%.

方案一北侧(预留为活动场)With Japanese-branded cars having given up nearly half of their market share in China, Japanese carmakers are quietly deemphasizing China. Toyota delayed planned investments in China and is not planning any new ones for the time being. When talking to executives of Japanese OEMs, it is hard not to notice how they suddenly talk all about South-East Asia and India, and about China only if they absolutely have to.

While Chinese exuberance definitely isn’t what it used to be, those R&D centers will be and have to be built. The world’s largest car market has its peculiarities that want to be addressed. Joint venture brands demand their share of research and development: Toyota works, not with much enthusiasm, on the “Ranz” brand for electric vehicles in China. And lastly, the Chinese government wants it that way. Every year or so, a draft regulation is floated that limits government car sales to Made-in-China cars, and to companies that spend at least 3 percent of their Chinese sales volume on R&D in China. These regulations usually fade away, or are ignored. After all, Chinese makers usually spend less than 3 percent on R&D, and taken seriously, those regs would leave Chinese functionaries without wheels.


Article and Photos 2 & 5 – Bertel Schmitt
Photo renderings 1, 3 & 4 – Toyota

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