Toyota Finally Pays the Price for "Looking Down On" Electric Vehicles After Sales Drop for Four Months in China?

Author: kimsu

"There is always a way when a car reaches the mountain; wherever there is a road, there are Toyota vehicles." For a long time, Toyota's "Toyota emblem" symbolized "fuel efficiency, durability, and high resale value," a golden reputation in the auto industry that was hard to shake.

However, entering 2026, this golden reputation has cracked. According to Nikkei, Toyota's sales in China in May were 102,300 units, a 32% year-on-year decline, marking the fourth consecutive month of year-on-year decline. The myth of paying a premium and waiting six months to collect the car has now faded under the surging tide of electrification.

"Legend" Fades, Toyota Faces Dilemma

Toyota's situation has become increasingly severe. In 2025, it could still defend the honor of the Japanese camp with sales of 1.78 million units in China, a slight increase of 0.23% year-on-year, becoming the only Japanese brand with positive growth in China. But entering 2026, the decline is obvious.

At a time when the NEV penetration rate has exceeded 60%, Toyota's once proud fuel vehicle lineup inevitably became the core "bleeding point." Taking the "National Icon" Corolla as an example, Autohome data shows that this model, which once dominated the A-class family car market for years, has seen monthly sales drop from a peak of nearly 40,000 units to around 3,000 units, far from even a fraction of its peak; the originator of urban SUVs, RAV4, saw average monthly sales exceeding 10,000 units after entering 2026, doing quite well, but the fact that the entry-level model's dealer price dropped to 140,000 yuan proves that this "God Car" that once couldn't be grabbed even with a 20,000 yuan premium has now been forced to the point of "trading price for volume".

Camry, which once attracted countless family users with its hybrid system, also couldn't escape. Monthly sales over 10,000 units still seemed common, but the model with an official starting price of 171,800 yuan now has a dealer price of under 140,000 yuan. It can be said that Toyota is currently maintaining its own dignity by "trading price for volume".

Toyota's dilemma in China is inseparable from its misjudgment of the electrification wave. This is a common issue among Japanese brands. When Chinese car manufacturers were going all out for new energy, Japanese brands showed an obvious passive attitude in electrification transformation. Akio Toyoda even publicly lashed out at "Electric vehicles are overhyped", and questioned the environmental friendliness of electric vehicles. This strategic misjudgment caused Japanese brands to miss the transition window.

Under various factors, Toyota's once dominating advantage of "fuel saving + high resale value" was gradually filled in. In the fuel vehicle era, Toyota's THS hybrid system was indeed the fuel-saving benchmark. But under the current situation where new energy technology is increasingly mature, its economic advantage no longer has absolute dominance. Represented by domestic plug-in hybrid technologies such as BYD DM-i and Geely Leishen, the fuel consumption when the battery is low has generally entered the 3L-4L/100km range, and they have pure electric range capabilities. For users with home charging conditions, choosing them is often more cost-effective.

Regarding resale value, looking at the May China Auto Resale Value Report released by the China Association of Automobile Distributors, although Toyota still ranks at the top, the resale value shows a downward trend and has been surpassed by domestic brands Trumpchi and Tank. The main reason is that the downward movement of the price system has affected the traditional premium space of used cars. In the long run, the "price war" will certainly dilute the brand value Toyota has accumulated for many years.

Embracing China's Support

Is Toyota's current dilemma due to being too stubborn? Actually, it is not entirely so, but also because the interest relations behind it are too complex.

China Auto Expert Jia Xinguang once stated, the root of Japan's auto industry's dilemma lies in path dependence. Japan's auto industry's supply chain is constructed with "Engine-Transmission" as core technology. It is extremely powerful and has almost insurmountable barriers. Mature technology brings market success, market success brings interest solidification, interest solidification eventually forms transition resistance.

Akio Toyoda also stated frankly, the cost for traditional car companies to fully shift to pure electricity is huge, which could lead to 5.5 million job losses. This is not a small number, Japan's total population is also just over 120 million. Such a result is undoubtedly a catastrophe. Huge fuel vehicle assets and interest chains let Toyota not be able to "all in" pure electricity like startups. Toyota dares not bet, and cannot afford to bet.

In addition, Jia Xinguang also pointed out that in the electrification and intelligence era, about 70% of Japan's fuel vehicle industry chain's technical accumulation cannot be reused across domains, which also leads to Toyota's reaction being relatively slow in the new energy vehicle wave. The pure electric model bZ4X launched in 2022 was a relatively intuitive example. Due to insufficient localization, backward intelligence and other issues, the Chinese market did not accept this car, leading to an official price cut of 30,000 yuan soon after launch for survival. Even so, it could not win back the hearts of Chinese consumers. Autohome data shows that the highest monthly sales of bZ4X was only 1,735 units.

Toyota chooses to further deeply bind with China and persist to the end. For example, establishing the China Chief Engineer system, the first "China R&D led" bZ3X performance was indeed commendable. Cumulative delivery broke through 100,000 units in 14 months, setting the record for the fastest breakthrough of 100,000 units for joint venture new energy. However, its subsequent sales performance fluctuated. Sales in March 2026 dropped to 3,689 units. Sales in April rose back to 10,027 units. It has not yet reached the stable period.

But bZ3X's performance clearly gave Toyota a clear signal: Borrowing strength from China is the way out. First, "Borrowing" people. Currently, Toyota's China Chief Engineer team has expanded from 4 to 7 people. China's local team now has more product definition rights. Second, "Borrowing" Chinese technology. Since we are half a beat slower in software-defined cars, let's work with domestic top autonomous driving suppliers like Momenta, Huawei, Pony.ai. For example, some Toyota models now have intelligent driving assistance systems jointly developed with Momenta. In the field of autonomous driving, the first mass-produced L4 autonomous driving bZ4X Robotaxi cooperated with Pony.ai has been rolled off the assembly line and conducted road testing. Subsequent commercial operation is also in preparation. This open collaborative stance is the inevitable choice for Toyota not to fall behind in the intelligent technology track.

There is also a phenomenon that is quite interesting. According to Nikkei, in the Southeast Asian market once known as the "Japanese Car Backyard", Toyota also made unprecedented adjustments to its supply chain. Not only does it purchase parts produced by Chinese companies in Thailand, but also urges local Tier-1 suppliers to join in. It is reported that this move can help Toyota reduce costs by 30%. It can be seen that although sales in the Chinese market have declined, "Made in China" and "Chinese supply chain" have become an indispensable "lifeline" in Toyota's global strategy. No wonder at the April 2026 Beijing Auto Show, Toyota did not emphasize "Japanese Technology" as usual, but aggressively carried the slogan "with China, for China" and released the "TO YOU" brand concept. After all, from all aspects, China is indeed a "highly desired asset".

Toyota is currently experiencing no small dilemma, not only sales decline, but financial report is also under significant pressure. Although compared to other Japanese brands, Toyota Fiscal Year 2025 did not fall into loss, still resilient but the fact of net profit down 19.2% year-on-year and operating profit down 21.5% year-on-year is still not optimistic. For Fiscal Year 2026, Toyota gave an operating profit expectation of 3 trillion yen, which will be about 20% lower than Fiscal Year 2025. This means Toyota will fall into a profit decline predicament for three consecutive years.

However, to say Toyota's "Golden Reputation" has completely failed is probably too early, after all, as long as Toyota can put down its stature, truly put the slogan "with China, for China" into practice, and launch products that truly understand the needs of Chinese consumers, it still has a big opportunity to continue to stay in this card game.