With the rise of BYD and other new energy vehicles (NEVs), joint-venture carmakers, once dominant in the Chinese automotive market, have been losing ground.

Market share erosion has even led some to speculate about their potential withdrawal from China. Purchasing a joint-venture vehicle has come to be seen as an outdated and uninformed choice.

Even Volkswagen, which has long been a leader, has struggled to stem this tide, allowing Toyota to claim global supremacy in sales volume and ranking in recent years.

Yet FAW Toyota defied expectations in November, achieving sales of over 90,000 units—a year-on-year increase of 38%—marking its best-ever November performance and a record for the year.

With an ambitious annual target of 800,000 units, FAW Toyota now aims to surpass 100,000 monthly sales in December. Its recent success suggests that joint-venture carmakers, rather than being on the decline, are carefully recalibrating their strategies and staging a comeback.

Surviving a Fierce Market Landscape

The rise of domestic brands and the advent of electric and smart vehicles have plunged joint-venture carmakers into a challenging environment.

With limited competitiveness in terms of value-for-money and intelligent features, many have seen their appeal diminish among Chinese consumers.

FAW Toyota, however, has a unique advantage: Toyota’s hybrid technology. Building on its reputation for high quality and fuel efficiency, the company has accelerated the adoption of hybrid vehicles and introduced upgraded configurations tailored for Chinese consumers.

Between January and November 2024, FAW Toyota sold 288,800 hybrid vehicles, a 30% year-on-year increase, accounting for 41% of its total sales. All its models now come with hybrid options.

In response to intense market competition, FAW Toyota refreshed most of its lineup in 2024, launched high-end models like the Prado and Crown sedans, and promoted its bZ3 electric sedan, developed using BYD’s EV technology.

These efforts made FAW Toyota the most aggressive joint-venture carmaker of 2024. The sharp rise in year-end sales reflects both market recognition and consumer approval of these initiatives.

Achieving Sales Growth at a High Cost

FAW Toyota’s pursuit of 100,000 monthly sales has come with significant sacrifices.

Benefiting from government incentives like trade-in subsidies, the company has offered unprecedented discounts, often cutting prices to attract buyers.

This approach, while not unique in the industry, has proven effective. Unlike Volkswagen, General Motors, and Nissan, whose pricing wars failed to yield a substantial rebound, FAW Toyota’s aggressive promotions have driven robust demand across its lineup.

Once reliant on the Corolla as its sole volume driver, FAW Toyota now boasts a diverse portfolio featuring both sedans and SUVs. In November alone, the RAV4 and Corolla Cross SUV duo sold over 40,000 units—a 122% month-on-month increase.

Meanwhile, sedans like the Corolla and Avalon achieved combined sales exceeding 24,000 units, a 150% increase from the previous month.

Lingering Challenges

However, a closer look at FAW Toyota’s sales reveals enduring weaknesses. The Avalon, a key model in the brand’s premium strategy, achieved only modest sales, even with steep discounts.

Similarly, models like the Crown Kluger, Crown Sedan, and Prado have yet to significantly enhance the brand’s image or influence in China.

Profitability remains a concern. Historically, FAW Toyota has operated with relatively low profit margins within Toyota’s global operations.

Aggressive discounting in 2024 has likely pushed new-car profitability to historic lows. While FAW Group’s strong backing provides some cushion, such strategies are unlikely to align with Toyota headquarters’ long-term vision.

This dynamic becomes especially complex when considering Toyota’s other major Chinese joint venture, GAC Toyota, which boasts annual sales of over 1 million units.

If GAC Toyota, with its high-end models like the Camry, Highlander, and Sienna, can achieve superior profitability without relying on an 800,000-unit sales scale, why would Toyota tolerate FAW Toyota’s pricing strategy, which risks undermining the global pricing and brand positioning of models like the RAV4 and Corolla?

Future Outlook: Challenges and Opportunities

GAC Toyota, celebrating its 20th anniversary, recently announced plans to reclaim its 2022 peak of 1 million annual sales within five years.

Shifting focus from price wars to improving customer service and dealership capabilities, GAC Toyota presents a formidable challenge for FAW Toyota.

Despite achieving historic highs of 800,000 annual sales and 100,000 monthly sales in 2024, the costs have been steep.

With a lineup focused on NEVs, including the upcoming bZ3C electric crossover in 2025, FAW Toyota faces tough questions: Can it sustain its sales momentum? Will its volume-for-value strategy remain viable?

In a highly competitive market, joint-venture automakers often emphasize "long-termism," a philosophy that prioritizes sustained success over short-term gains.

For Toyota, balancing survival with profitability requires a delicate equilibrium between its joint-venture partners.

While the automaker remains committed to the Chinese market, its ambitions extend beyond temporary sales growth. Toyota aims for a stable, long-term increase in market share and brand influence.

As 2024 draws to a close, FAW Toyota’s remarkable sales surge may offer hope, not just for the company but for joint-venture automakers broadly.

Far from signaling retreat, such efforts underscore the importance of maintaining a competitive presence in China’s evolving automotive landscape.

The Chinese market still needs joint-venture brands to weather downturns and provide a counterbalance amid rising pressure on domestic players.