Toyota Motor has reportedly laid off 1,000 workers in China, indicating mounting pressure on Japanese carmakers to maintain their market share on the mainland due to their slow transition to electric vehicles (EVs).

Toyota said the decision by its joint venture with Guangzhou Automobile Group (GAC) to terminate the labour contracts was the result of its current production levels, Reuters reported on Monday, citing a statement from the carmaker. GAC Toyota could not be reached for comment on Tuesday.

The move follows job cuts at other international firms such as Ford and Mitsubishi in the world’s largest automotive and EV market where three out of 10 new cars are powered by batteries.

In mid-July, Mitsubishi’s venture with GAC said it would cut staff costs to turn itself around following a sharp drop in sales. Mitsubishi did not say how many employees would be affected. Earlier, in May, Ford was reportedly looking to cut more than 1,300 jobs amid falling sales.

“Japanese carmakers from Toyota to Mitsubishi have lost their market share in China due to Chinese drivers’ [preference] for electric cars,” said Eric Han, a senior ­manager at Suolei, an advisory firm in Shanghai. “Toyota was the least affected Japanese carmaker because its petrol cars are still relatively attractive to many Chinese motorists.”

GAC Toyota delivered 429,662 vehicles, mostly petrol-powered cars, in the first six months of 2023, a decline of 5.2 per cent year on year, according to data from the China Passenger Car Association. It had a 4.5 per cent share of the mainland’s automotive market, down from 4.9 per cent in the same period a year earlier.

GAC Toyota has only one EV model, the bZ4X sport-utility vehicle, on sale in China. It sold 4,794 units in the first quarter of this year, with the company accounting for about 0.6 per cent of the EV market and ranking 25th among all brands on the mainland, according to CarNewsChina.com.

Toyota’s other Chinese venture with FAW Group in Changchun, capital of northeastern China’s Jilin province, reported sales of 368,283 units in the first half of 2023, up 4.8 per cent year on year.

The carmaker’s overall deliveries between January and June fell 2.8 per cent year on year.

The top six Japanese carmakers operating in China – Toyota, Nissan, Honda, Mazda, Mitsubishi and Subaru – sold 1.71 million conventional vehicles between January and June, a 19.9 per cent decline year on year, according to industry data provider MarkLines.

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The last time Japan’s top carmakers reported such a massive sales slump was in 2012 in the wake of anti-Japan protests over the disputed Diaoyu Islands in the East China Sea. Monthly sales in September of that year fell by between 35 per cent and 50 per cent at Nissan, Honda and Toyota.

Japanese brands, particularly Toyota, Nissan and Honda, have been well received by mainland drivers over the past decade because of their sleek designs and fuel efficiency. They emerged winners in a faltering Chinese market between 2019 and 2022.

But the surging penetration of electric cars in China, buoyed by drivers’ rising penchant for battery-powered vehicles with smart features like autonomous driving technology, knocked Toyota and its Japanese peers off their pedestal due to their lack of EV models.

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