Toyota Halts Next-Generation EV Development, Focuses on Profitability and Popular Models

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[Financial News, Tokyo = Reporter Seo Hye-jin] Toyota Motor Corporation has decided to halt development of its next-generation electric vehicles (EVs) and concentrate its resources on popular models such as sports utility vehicles (SUVs). The move signals a shift toward a profitability-driven strategy amid slowing growth in the global EV market and intensifying competition from Chinese automakers.
According to reports from Nihon Keizai Shimbun and Yomiuri Shimbun on the 29th, Toyota will stop developing the mass-production version of Lexus's sedan-type next-generation EV, the LF-ZC, which had been scheduled for launch in the middle of next year. The model had drawn attention as one of Toyota's key strategic vehicles, featuring next-generation high-performance batteries and Giga Casting technology.
The Nikkei said the decision to suspend development reflects the slowdown in the global EV market.
In the United States, the Donald Trump administration is revising its previous decarbonization policy stance and pushing to eliminate EV purchase tax credits. The European Union (EU) has also stepped back from its plan to effectively ban new sales of internal combustion engine vehicles from 2035.
Competitors are also adjusting their strategies. Honda Motor has abandoned its goal of converting all new vehicles to EVs and fuel cell vehicles (FCVs) by 2040, and has repositioned hybrid vehicles (HVs) as a growth pillar.
\r\nSubaru has delayed the launch of its in-house EV originally planned for 2028, while Volkswagen (VW) has ended EV production in the United States.
The rapid rise of Chinese automakers is also adding pressure. According to the International Energy Agency (IEA), Chinese companies accounted for 60% of global EV sales last year. Backed by low-cost strategies built on domestic supply chains and strong competitiveness in autonomous driving and connected technologies, they are quickly expanding their market share.
A Toyota supplier official said, "Chinese cars used to have a strong image as low-priced products, but their quality has improved very quickly recently." The official added, "At current price levels, it is not easy for Japanese automakers to compete."
In fact, Chery Automobile and BYD are pushing to launch kei-car-class EVs in the Japanese market. Industry concerns are also growing that Japanese automakers may gradually fall behind in a price-driven market structure.
The decision also appears to have been influenced by Kon's emphasis on improving the break-even sales volume under his new leadership. Analysts say Toyota judged that it would be difficult to secure market competitiveness with a coupe-style EV strategy for the Lexus brand alone.
At an earnings press conference earlier this month, Kon said, "We are also considering a reorganization of our production models." He added, "The more we pursue a multi-pathway strategy, the more complex parts and specifications become, and that can make it harder for customers to understand. If we streamline it, we can expect significant benefits."
Toyota's global EV sales last year rose 42% from a year earlier. Sales have been strong for the SUV-type EV Toyota bZ4X, as well as the low-cost Toyota bZ3X for the Chinese market. The company plans to improve profitability by cutting research and development expenses and fixed costs, while concentrating management resources on models with proven sales performance.
Regarding Toyota's future EV strategy, Kon said, "We will carefully reflect customer needs and regional market characteristics in our product and supply strategies."
However, Toyota plans to continue developing future core technologies, including all-solid-state batteries and Giga Casting, which integrates the vehicle frame into a single structure.
\r\nAdvanced technologies accumulated at sites such as the Toyota Motor Corporation Tahara Plant in Aichi Prefecture, which had originally been considered as a production base for the LF-ZC, will be flexibly applied to high-demand models such as SUVs in the future.
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sjmary@fnnews.com Seo Hye-jin Reporter