Toyota leading automaker adjusts electrification plans by reducing EV targets and postponing key investments as global semiconductor shortages and trade tensions reshape industry strategies.
The global automotive industry is grappling with an unprecedented series of challenges that are reshaping its operational and strategic landscape. Among the most prominent challenges are the persistent semiconductor shortage, escalating trade tariffs, and a widespread delay in key i...
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nvestments. Leading manufacturers such as Toyota, Nissan, and BMW are responding cautiously, recalibrating their ambitions and strategies to navigate these turbulent times.
Toyota, a central player in this transformation, has recently made headlines by scaling back its electric vehicle (EV) production targets and postponing major infrastructure investments. The Japanese giant announced a reduction of its EV sales forecast for the current fiscal year by around 10%, lowering the target from 277,000 to approximately 250,000 units. More strikingly, in 2024 and 2025 developments, Toyota has cut its 2026 EV production target by 30% to one million units amid weak global demand for electric vehicles, though it maintains a broader goal of producing 1.5 million EVs annually by 2026 and scaling up to 3.5 million by 2030. Last year, EVs accounted for just about 1% of Toyota’s worldwide sales, with roughly 104,000 units sold.
Adding to this cautious approach, Toyota has indefinitely delayed the construction of a new lithium-ion battery plant in Kanda, Fukuoka Prefecture. Initially slated to begin production in 2028, the plant was expected to revolutionise Toyota’s EV range by doubling vehicle range to 1,000 kilometres and cutting battery production costs by 20%. The postponement reflects a combination of sluggish EV demand worldwide and rising construction costs. Toyota’s subsidiary Primearth EV Energy, which fully became a Toyota entity in March 2024 after acquiring Panasonic’s shares, will oversee the plant once operational, but the timeline is now uncertain as the company revises its business plans.
This strategic shift at Toyota is not isolated. Nissan has also curbed production of several SUV models due to semiconductor shortages, primarily from Nexperia, a critical chip supplier with significant manufacturing in China. This highlights the complex geopolitical vulnerabilities linked to supply chains, as rising tensions amplify the risk of disruption. European manufacturer BMW reports shrinking operating margins, attributing the strain to intensifying competition and tougher international trade conditions, especially for highly technological models.
The overarching issue for the automotive sector remains the fragile and complex supply chain. Companies are compelled to rethink production plans extensively by diversifying suppliers and pursuing vertical integration to reduce reliance on single supply sources or geopolitically sensitive regions. Some are resorting to strategic stockpiling of components and pushing for new international trade agreements to ease tariff burdens.
These supply issues reverberate to consumers as well, with longer delivery times and rising prices, particularly for vehicles rich in electronic content. Automakers face the dual challenge of balancing cost competitiveness with the ongoing imperative to innovate and invest in future technologies.
Analysts underscore that the crisis affects both supply and demand. Elevated consumer costs, global economic uncertainty, and the financial burden of technology investments are causing companies to defer or downscale projects, exemplified by Toyota’s battery plant delay.
Looking forward, potential remedies lie in accelerated supplier diversification, strengthened vertical supply chain ownership, and government intervention through incentives aimed at bolstering local production and semiconductor industry support.
In the near term, Toyota appears to be pivoting towards a more pragmatic electrification strategy: prioritising full hybrid technology, which offers reliability and market flexibility, while reserving the launch of fully electric models predominantly for its premium Lexus brand starting around 2027. The flagship Toyota brand will adopt a more measured approach, reflecting the current market complexities.
The automotive industry is thus navigating through a profound transitional phase characterized by short-term tactical adjustments amid longer-term shifts toward electrification. The ability to adapt quickly and responsively will likely determine which manufacturers lead the market in the coming years.
Source: Noah Wire Services
