Toyota shifts to a China-led strategy, departing from its China Adaptation approach to boost competitiveness. The change, revealed at Auto Shanghai 2025, marks a significant shift in its localization strategy.
Toyota introduces two initiatives: the One R&D System and Regional Chief Engineers. The One R&D System merges resources from Toyota (China), FAW Toyota, GAC Toyota, and the Intelligent Electrification R&D Center, a joint venture with BYD. This strategy strengthens local supplier and tech firm partnerships while providing the Chinese team access to global R&D resources.
The Regional Chief Engineer program stands out, with young Chinese engineers leading vehicle development and sales strategies, directly engaging with consumers at dealerships. At Auto Shanghai, Toyota showcases the bZ5 and bZ3X battery electric vehicles as key examples of its China-led strategy, emphasizing the role of Chinese engineers in their development.
Toyota unveils the bZ7, its flagship electric sedan, globally for the first time. The bZ7, Toyota’s first D-segment electric sedan, incorporates Huawei’s Harmony Cockpit technology, reflecting smart tech trends in the Chinese market.
Despite selling over 20 million vehicles in China over 60 years, Toyota’s sales have declined since 2020. In 2024, sales dropped 6.9% year-over-year to 1.78 million units. Analysts attribute this slump to Toyota’s weak electric vehicle lineup in a rapidly electrifying market.
Through its China-led localization strategy, Toyota plans to respond to the rapidly changing Chinese EV market actively and aims to regain market share.
Toyota’s strategic shift in China highlights the broader challenges global automakers face in the world’s largest car market.
In 2024, global brands face declining competitiveness in China. Volkswagen develops China-specific models and empowers local joint ventures to boost sales, while BMW partners with DeepSeek to implement China-tailored AI. These moves reflect a broader trend of global automakers shifting from localization to China-led strategies.
Toyota’s One R&D System and Regional Chief Engineer framework represent key adaptations to the changing landscape. The integration of Huawei’s Harmony Cockpit in the bZ7 highlights Toyota’s commitment to meeting Chinese consumers’ preferences for smart vehicle technology.
With domestic players like BYD, XPeng, and NIO leading the Chinese EV market, global brands’ success relies on swift and effective localization strategies. All eyes are on Toyota to see if this strategic pivot can reignite its growth in China.
