Toyota's China JV Axes 1,000 Workers Amid Intense Auto Market Price War

Toyota Motor's joint venture (JV) with Guangzhou Automobile Group in China has prematurely ended contracts for nearly 1,000 dispatch workers, highlighting the escalating price competition in the world's most significant auto market.

The JV, a collaboration between Toyota and China's state-owned Guangzhou Automobile Group (GAC), laid off these workers over the weekend. Reuters spoke to three workers who requested anonymity due to privacy concerns, and they confirmed that compensation was offered. These workers were originally employed through labor service companies and assigned to work at the factory in the southern city of Guangzhou.

In a statement provided to Reuters, Guangzhou Toyota Motor Co, the Toyota JV in China, explained that the termination of contracts for approximately 1,000 workers was due to recent production levels. The company is committed to complying with legal requirements by providing necessary economic compensation and offering detailed explanations to those affected.

The GAC Toyota factory, with an annual output capacity of 1 million vehicles, employs around 19,000 individuals, according to information available on its website. Among the models it produces are Camry, Levin, and bZ4X.

This development from Toyota follows a similar move by Mitsubishi Motors (7211.T) in July. Mitsubishi announced its intention to reduce staff costs at its joint venture with GAC in China to revitalize its business.

During an earnings call on Monday, Mitsubishi Motors Chief Executive Takao Kato informed reporters that the company had not yet reached an agreement with its local counterpart in China on the specifics of the restructuring plan. Kato also mentioned that the production of Mitsubishi's new Outlander model remains suspended, citing the "severe" conditions faced by the company in China.

Among automakers, Japanese brands experienced the largest sales decline in China during the first half of this year. According to the China Association of Automobile Manufacturers, their market share has decreased from nearly 20% to 14.9% compared to the previous year. Conversely, sales of Chinese brands accounted for 53% of the total.

To recover its sales in China, which had contracted by 9% in the first six months, Toyota has been relying on its electric vehicle (EV) models. The company initiated a price war, following Tesla's lead, and reduced the starting price of its bZ4X EV by 15% in February.

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