Exclusive: A delicate balance – Toyota has bothered to bid in the US before China passes its market

BEIJING (Reuters) – Last month, Toyota Motor Corp announced the conclusion of two contracts in China small but large scale in terms of strategic planning.

The automaker announced the establishment of a green technology research institute with Tsinghua University and the supply of the BAIC group's Foton public utility unit for bus fuel cell technology. But before these plans can be unveiled, Toyota took months to work on new investments – in the United States.

Technology transfers represent gestures of goodwill towards Beijing from the Japanese manufacturer, who wants to "accelerate the accelerator in China," said General Manager Akio Toyoda to an internal management group, according to reports meetings on 19 and 23 April consulted by Reuters.

The announcement of the US investment was initially a strategy that Toyoda felt should be pursued to avoid the wrath of US President Donald Trump, revealed the minutes, offering a rare glimpse into how which she sought to act with caution as the United States and China fought for investment, employment and influence in the global economy.

"For Toyota to operate around the world, we need to strike a balance between China and the United States," Toyoda said. "It is imperative to avoid making enemies."

According to the report released on April 23, the Japanese automaker is doing what one of the unnamed leaders described as a "significant shift to focus on China" – a market where it is far behind industry leaders, Volkswagen AG and General Motors Co.

Toyota declined to comment on its internal meetings.

Its pivot to China – which many other global manufacturers are also creating – has been facilitated by the thaw of relations between China and Japan, but complicated by Trump's trade policy.

This includes the trade war between Washington and Beijing as well as Trump's threat to impose tariffs of up to 25% on imported cars manufactured by foreign manufacturers. On Friday, Trump said some imported vehicles and parts posed a threat to national security, although he deferred until six months the decision to impose tariffs.

In response, Toyota has released one of its strongest messages on potential fares to date, calling this designation "a major step back for US consumers, workers and the auto sector" and claiming that the message "Our investments are not welcome".

LOVE FOR AMERICA

Toyota is striving to show its commitment to the United States and, in the minute of March 19, Toyoda explained that a new $ 749 million investment in production capacity and jobs in the United States United was an "essential" step before accelerating China 's expansion efforts. .

Announcing the new investment on March 14, Toyota said the money raised the five-year commitment in 2017 from $ 10 billion to nearly $ 13 billion. The day after the announcement, Toyoda also addressed the Economic Club of Washington stating, "I love the love of the United States."

"I just do not understand why we are called a national security threat and it hurts my heart," Toyoda said in response to a question posed after his speech. "One thing I would promise, regardless of the focus of the discussion, is that Toyota will not leave America."

While many other manufacturers, including US automakers, have announced investments in the United States since Trump came to power in 2017, the $ 13 billion announced by Toyota represents by far the largest amount .

Toyota would have continued its investments with new US investments, even without its plans in China, but there was a lot of internal planning on how the ads should be timed, informed sources said. Sources, who were not allowed to talk to the media, refused to be identified.

As another sign of Toyota's cautious approach to Washington, board member Ikuro Sugawara was sent in April to meet US Ambassador William Hagerty at the US Embassy in Tokyo to announce that the two agreements with China would be announced.

"I did not think we should do it, but the ambassador praised our efforts more than I expected," said Sugawara, former deputy minister of commerce, in the minutes of the meeting of April 23rd.

The US Embassy in Tokyo declined to comment on the details of the meeting, saying it was only in regular contact with Toyota and many other Japanese companies about their plans to invest in the United States.

CALM PIVOT IN CHINA

For many automakers, the US auto market is a key profit center that generates sales in the industry of about 17 million vehicles a year. But China has quickly grown in importance – with 28 million vehicles sold in 2018 – and is attracting new investment from global automakers eager to follow the strong promotion of the electric car.

Toyota holds 14% of the US market, but in China, its market share was only 5.3% last year and the 1.49 million vehicles sold accounted for less than half of the volume sold by VW and GM .

It aims to increase sales by 10% each year over the next five or six years – about the equivalent of 3 million cars by the mid-2020s, according to a source at a parts supplier Toyota, who refused to identify because he was not. work for the builder.

Asked about Toyota's ambitions in China, a company spokesman said China was an important market and that the automaker was considering strengthening its base in order to grow its business.

China has sometimes been a difficult market for Japanese companies for historical reasons. In 2012, sales fell sharply as a result of diplomatic clashes on controversial islands, called Diaoyu in China and Senkaku in Japan.

According to company sources, Toyota's pivot has gained momentum following an official visit to Japan by Chinese Premier Li Keqiang in May, during which Toyoda accompanied Li during a tour of Toyota's facilities on the island of Hokkaido, in the north of the country.

Since then, Toyota has embarked on an expansion of its manufacturing capacity in China, with the intention of increasing its annual production capacity of 120,000 vehicles in its Tianjin and Guangzhou factories.

It also expands distribution networks and shares technology to promote goodwill among Chinese leaders, said Toyota sources.

"We have the full support of the Chinese government, but we should not take it for granted and must continue to make steady efforts," Toyoda said.

Unlike the efforts of the American manufacturer in the United States, Toyota is content to keep a relatively low profile for its projects in China. Neither the plans of Tianjin nor those of Guangzhou have been officially announced by Toyota. The amounts of the investments were also not disclosed.

Last month, a press conference for international media at the Shanghai Auto Show was canceled. This decision, allegedly announced by a company, is the result of a warning from Toyoda to be cautious when it comes to dealing with media increases in tariffs or US import quotas.

(This story has been reinvented to correct the Guangzhou spelling in paragraph 25)