Toyota Lays Out Plans For China And Emerging Markets

Toyota Motor Corporation (NYSE:TM) is planning to build a new plant in Tianjin, China, to boost production as it faces higher demand for its vehicles in the country. Major automakers are investing heavily in this region as they expect China to be the next growth engine.

At the same time, Toyota is also aiming to reduce dependence on developed markets by targeting to sell half of its vehicles in emerging markets by 2015. To achieve this target, it plans to roll out eight compact models to capitalize on the growing auto demand in countries such as China, Indonesia, Brazil and India. ^[1] The automaker aims to cut costs by sourcing locally made parts. Toyota will not be entering the ultra-cheap categories but instead hopes to price its cars at $12,500 and above. Currently, emerging markets make up about 45% of the Toyota’s global sales.

We currently have a $93 price estimate for Toyota’s stock, which is about 20% above the current market price.

See our full analysis for Toyota’s stock here

Beefing Up Presence in China

Toyota already has factories in Tianjin, Changchun, Chengdu and Guangzhou in collaboration with China FAW Group Corporation and Guangzhou Automobile Industry Group Company with an installed capacity of 920,000 vehicles per year in the country. With the inception of the new plant, the capacity will exceed 1 million vehicles. ^[2] In the first five months of 2012, Toyota sold 372,000 vehicles, an increase of 26% over the previous year.

Besides Toyota, Nissan Motors is building a $785 million plant in Northeast China. The plant will begin production in 2014 with an initial capacity of 25,000 units but the capacity would be beefed up to 120,000 by 2015 and 240,000 by 2017. ^[3]

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Toyota looks to emerging markets, au.news.yahoo.com, May 25, 2012 [↩]
2. Toyota eyes new auto plant in China’s Tianjin, thehindubusinessline.com, June 19, 2012 [↩]
3. Exclusive: Nissan plans $785 million north China plant, to challenge VW, Toyota: source, reuters.com, June 14, 2012 [↩]