Teams in China will be responsible for leading development as they better understand local preferences.

Toyota is redoubling its ambitions for Chinese marketaiming to produce up to 3 million vehicles per year domestically, while struggling to regain market share lost to booming national brands like BYD. The move appears to reflect Toyota’s recognition of the challenges it faces in the world’s largest auto market, where local brands have gradually gained ground by offering competitive, well-tailored products that resonate with Chinese buyers.

According to three sources familiar with the matter, who spoke on condition of anonymity to Reuters, Toyota plans to significantly increase production in China by the end of the decade, although no formal targets have been set. This would represent a substantial increase from the 1.75 million vehicles Toyota produced locally last year and a 63% increase from the 1.84 million vehicles built in 2022, which was a record for the company .

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The same sources claim that Toyota has informed some of its suppliers of the planned increase in production. Additionally, the company aims to bring its two Chinese joint ventures closer together to improve efficiencies and plans to allow local staff to lead much of the development, leveraging their understanding of Chinese consumer preferences.

The company also plans to consolidate vehicle production within its joint ventures into a single operation in the future. Although the models will be produced at a single site, they will continue to be offered across both dealer networks, signaling a more unified approach to its fragmented local strategy.

Toyota did not comment on the details of the report but acknowledged the uphill battle it faces in China. “Facing intense competition in the Chinese market, we are constantly considering various initiatives,” the company said.

Toyota’s struggles are not unique among traditional automakers in China. Established brands like Honda and Nissan have already reduced production capacity, while Mitsubishi has thrown in the towel and left the market altogether. Meanwhile, local automakers like BYD are rapidly gaining ground, offering attractive products at competitive prices that resonate with Chinese consumers.

Toyota has made efforts to localize its offerings. An example is the bZ3Can electric sedan designed specifically for China. It is equipped with a lithium-iron-phosphate battery from BYD’s FinDreams battery division, offering a range of 500 to 600 km (310 to 372 miles).