Toyota Motor Corporation is considering restructuring some of its Chinese operations in response to rising competition from local brands, according to reports in Japan citing a source close to the company.

Japan’s leading automaker is understood to be considering merging its Beijing-based sales operations with those based in Tianjin, within its 50%-owned FAW Toyota Motor Company joint venture, in an effort to improve efficiency.

The source confirmed that China remains a strategically-important market for Toyota and that the restructuring at FAW Toyota Motor Sales Company, which controls approximately 700 dealerships in the country, will not affect its manufacturing operations. New model launches will also not be affected by the internal restructuring.

The news comes as foreign automakers have seen their Chinese earnings plunge this year amid rising competition from BYD, Geely and numerous other local brands and aggressive discounting. Toyota reported a 30% drop in earnings from its Chinese operations in the six months to the end of September 2024, while its vehicle sales in this market fell by almost 14% at 866,541 units.

Earlier this month, Toyota Motor’s chief financial officer, Yoichi Miyazaki, warned: “The current price competition in China could intensify further." Toyota is currently rebuilding its China strategy with plans to produce models designed specifically for the local market. It is targeting 2.5 million sales in China by 2030, up from 1.91 million units in 2023.