Toyota wants to use more hybrid system parts made in China

Tue Apr 22, 2014 10:29am EDT
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By Yoko Kubota and Norihiko Shirouzu

CHANGSHU, China (Reuters) - Toyota Motor Corp (7203.T: Quote) wants locally procured parts to make up at least half the components in the gasoline-electric hybrid propulsion systems for the Corolla and Levin cars it plans to start making in China next year.

Shinichi Matsumoto, Vice President for Toyota Motor Engineering & Manufacturing in China, said Toyota needs that level of local content in order to bring down prices of hybrids and to generate more sales in the world's biggest auto market.

Toyota, which currently pays costly tariffs and transport fees for bringing key components from Japan to assemble hybrid vehicles in China, aims to slash costs by using many locally procured materials and parts, Matsumoto told reporters on Tuesday.

"My feeling is that unless the local procurement ratio reaches 50 percent, we can't call it 'localized'," he said at a research and development centre in Changshu, about 80 kilometers (50 miles) west of Shanghai. He was referring to number of parts procured specifically for the hybrid system.

"Ultimately, our goal is to localize 100 percent."

Matsumoto also said that using parts procured in China for its new hybrid cars does not mean it is lowering quality to pursue higher sales. Toyota plans to keep the system's quality equal to that achieved in Japan, he said.

The world's biggest auto maker said this week that it will start manufacturing and selling Corolla and Levin sedans for China in 2015 with a locally made hybrid system including the battery and the motor, the first time it will make hybrids outside of Japan using key components procured locally.

But made-in-China components does not necessarily mean made-by-Chinese companies. While localizing parts is going more smoothly than Toyota had expected, much of that output currently comes from Chinese units of Japanese parts makers with manufacturing operations in China, Matsumoto said.   Continued...

People look at a Toyota car during the 15th Shanghai International Automobile Industry Exhibition in Shanghai April 21, 2013. REUTERS/Carlos Barria