NAGOYA, Japan — Toyota Motor will temporarily scale back production of Lexus luxury vehicles due to plummeting sales in China amid the coronavirus outbreak, Nikkei has learned.
The Japanese automaker is expected to shrink output by about 6% at two domestic assembly plants. The cutbacks will start Monday and last until the end of the month.
Toyota’s overall sales in China plummeted 70% on the year in February to 23,800 units. The spread of the new coronavirus that month eroded consumer appetite, fueling deep-seated concerns that demand will take a while to recover.
“I don’t think China is in a car purchasing mood right now,” said a source close to Toyota.
In response, Toyota will shave output at the Miyata plant in western Japan’s Fukuoka Prefecture, as well as the Tahara plant in central Aichi Prefecture, by ceasing overtime work.
During the latter half of the month, the plants will produce between 1,000 and 2,000 fewer Lexus vehicles. The volume will correspond to roughly 0.2% of annual global Lexus sales.
Toyota will base the subsequent production schedule on Chinese market trends. If conditions fail to improve, the company could be forced to deepen production cuts.
Last year, approximately 765,000 Lexus vehicles were sold globally. China accounted for a quarter of the sales at about 202,000 units, making the market the second largest after North America.
Toyota will roll out the first all-electric Lexus this year in China, indicating its focus on the market. But Lexus’s presence in China has left the brand completely exposed to the coronavirus fallout.
Meanwhile, Toyota is steadily normalizing operations in China. Utilization rates at two of its four Chinese assembly plants have returned to pre-coronavirus levels. As of Friday, roughly 95% of Toyota dealerships have restarted operations. Toyota has also made headway on parts procurement in both China and Japan.