TOYOTA

Toyota’s overall sales surge, but the company falters in China

The Toyota Group—which primarily encompasses the Toyota and Lexus brands—is by far the world’s largest automotive conglomerate, having sold approximately 11.3 million vehicles in 2025. Despite this impressive performance, the Japanese group continues to sell a limited number of electric vehicles (EVs). This has hindered its sales in China—the world’s largest market—where electric models accounted for about 32% of total sales in 2025, equivalent to 8 million units.

Looking at the period from January to September 2026, the Toyota Group sold 7.52 million vehicles globally, a 3.4% decline compared to the previous year. While sales grew by 5.5% in Japan, 1.1% in North America, and 1% in Europe, the manufacturer faced significant headwinds in Asia, where sales fell by 9.3%—driven largely by its performance in the Chinese market.

In the first nine months of the year, Toyota sold 1.05 million vehicles in China, an 18.9% drop compared to the same period in 2025. This comes at a time when the Japanese brand offers a limited selection of electric vehicles in Europe and the U.S., though it provides a somewhat broader range in China—including the bZ3, bZ3X, bZ5, and bZ7 models—through its joint ventures with local manufacturers, namely GAC Toyota and FAW Toyota. The reality, however, is that this Japanese group is lagging significantly in the production of battery-powered vehicles. This is underscored by the fact that electric vehicles (including fuel-cell models) accounted for only 4.1% of the company’s total global vehicle sales through the first nine months of 2026—an improvement, certainly, over the 1.8% share EVs held during the full 12 months of 2025.

While Toyota’s electric vehicle sales surged by 127% through September 2026, this growth could have been even more substantial, especially given the declining demand among Chinese drivers for vehicles equipped with internal combustion engines (or hybrids). It appears that the persistent rise in fossil fuel prices has further steered Chinese consumers away from petroleum-dependent vehicles and toward electric alternatives.

For a long time, Toyota remained dismissive of electric vehicles—a stance particularly prevalent during the tenure of CEO Akio Toyoda, grandson of the company’s founder. Consequently, the shift toward battery-powered models came too late compared to competitors and lacked sufficient conviction, leaving the brand unable to gain a strong foothold—most notably in China, a market where there is a clear preference for battery-electric vehicles.

China continued to be a significant drag on Toyota's global performance. Sales in the world's largest automotive market fell 19.7 per cent year-on-year in September, extending the decline to an eighth consecutive month.

Toyota attributed the weakness partly to higher petrol prices, which weighed on demand for petrol-powered and hybrid vehicles. The sustained downturn underscores the competitive pressures facing foreign automakers in China, where changing consumer preferences and pricing dynamics have made the market increasingly challenging.

Production in China also contracted sharply, falling 18.6 per cent year-on-year in September. The decline in both sales and output points to continued weakness in Toyota's business in the country.

The Middle East was another major source of weakness. Toyota's regional sales plunged 29.8 per cent during the month, contributing to the overall decline in global deliveries.

Performance in Toyota's other major markets was more resilient. Sales in the United States, the company's largest market, rose 8.4 per cent year-on-year in September. However, US production declined 2.9 per cent, indicating that manufacturing output did not move in line with sales growth.

In Japan, Toyota's domestic sales increased 1.8 per cent, while production rose 5.8 per cent over the same period.

The contrasting trends across markets highlight the uneven nature of demand in the global automotive industry, with regional conditions playing a significant role in shaping manufacturers' sales and production strategies.

The third consecutive monthly decline in both sales and production highlights the pressure on Toyota's global operations, particularly from its exposure to markets experiencing sustained weakness.

China's eight-month sales decline is a notable concern, given the importance of the market to global automakers. Meanwhile, the sharp fall in Middle East sales adds to the pressure on Toyota's international performance.

Although growth in the US and Japan provided some support, it was insufficient to offset declines elsewhere.

Toyota's September figures offer a snapshot of the challenges confronting the global auto industry, as manufacturers navigate uneven regional demand, changing consumer preferences and intensifying competition in major markets.

The data also underline the importance of developments in China and the Middle East in determining whether Toyota can reverse the recent decline in its global sales and production.

Chinese automakers are not making life easy for international manufacturers—quite the opposite, in fact. Proof of this is that Toyota is facing a global decline in sales, with the situation in China being particularly dire, as the company’s vehicle registrations there have collapsed. BYD is the primary driver behind this trend.

In May, Toyota sold 834,729 vehicles worldwide—a 7.2% drop compared to the same period last year. Brazil accounted for 14,819 of those units, representing a 6.4% year-over-year decline; the country now represents just 1.8% of the brand’s global sales.

This scenario stands in stark contrast to what is being observed in the U.S. and China. In the United States, 280,539 units were sold in May, with a year-over-year decline of only 0.1%. The U.S. remains Toyota’s second-largest global market, accounting for 33.6% of its total sales, while Asia as a whole represents 26.9% of the manufacturer’s global volume.

Toyota sold 102,299 vehicles in China in May—a 31.7% drop compared to the same period the previous year. Meanwhile, BYD is making strong gains in the global market and has already become the top-selling brand in China.

In 2025, Toyota sold 9.6 million vehicles, while BYD sold 4.6 million. However, in May 2026, the Chinese manufacturer saw its sales grow by 29.2% year-over-year, whereas Toyota experienced a 31.7% decline. On the global stage, one company is gaining ground while the other is losing market share. As a result, BYD Chairman Wang Chuanfu promised in an interview with Reuters to make the company the world’s best-selling brand within five years. In other words, BYD aims to surpass Toyota globally in half a decade. In Brazil, it has already achieved this goal.

Looking at cumulative sales from January to May 2025, BYD registered 39,544 cars, compared to 74,100 for Toyota. This year, however, the situation has shifted. BYD sold 77,785 units in Brazil during the first five months of the year, while Toyota recorded 65,471 vehicles. Consequently, the Chinese manufacturer now holds the fifth position among the largest automakers in the country, while the Japanese firm sits in sixth place.

Toyota is facing significant challenges in China, primarily due to the rapid advancement of local electric and hybrid vehicle manufacturers (such as BYD) and a lack of competitiveness in fully electric models and onboard technology.

Key reasons for the decline:

• Dominance of local competitors: Chinese brands like BYD maintain highly verticalized supply chains—producing their own batteries, semiconductors, and motors—which allows them to manufacture advanced electric and hybrid vehicles at much lower costs.

• Lag in electrification: Toyota has historically focused on internal combustion engines and traditional hybrids, making it slow to respond to the strong demand from Chinese consumers for fully electric and connected vehicles ("smart cars").

• More technology at a lower price point: Chinese vehicles offer superior entertainment, autonomous driving, and connectivity features at lower price points, attracting even those consumers who were previously loyal to Japanese brands.

• Price wars and production drops: The pressure is so intense that production by Japanese automakers (Toyota, Honda, Nissan, and Mazda) in China has plummeted—falling by approximately 63% in recent periods—forcing Toyota to cut prices and seek local partnerships in an effort to regain market share.

Autonews