Summary of Key Points
In May 2026, Toyota's sales in China plummeted by 31.7% year-on-year and 3.9% month-on-month, marking the fourth consecutive month of decline with the magnitude of the drop increasing each month. This not only underperformed the industry average (industry decline of -22.1% year-on-year and +9.2% month-on-month) but also reflected a broader trend: the overall decline in Japanese car sales, the impact of high oil prices on fuel-powered vehicles, and the growing dominance of new energy vehicles in the market. In May, Japanese brands' market share dropped to 10.5%, while fuel-powered vehicle retail sales fell by 39%. Meanwhile, the penetration rate of new energy vehicles has remained above 60% for two consecutive months.
Detailed Analysis
1. Toyota's Sales on a Downward Trend
Toyota sold 102,000 units in May, a year-on-year decrease of 31.7% (almost 10 percentage points worse than the industry average) and a month-on-month decline of 3.9%. This represents a continuous fourth consecutive month of year-on-year declines: -13.9% in February, -8% in March (a brief improvement), -25.4% in April, and -31.7% in May, indicating a worsening situation with no signs of recovery.
2. High Oil Prices as the Direct Trigger
Toyota itself cited rising gasoline prices as the reason for the decline in sales, but this is not a valid excuse. In May, fuel-powered vehicle retail sales were only 560,000 units, a year-on-year decrease of 39%. Joint-venture brands were the hardest hit (-41%), followed by domestic fuel-powered vehicles (-39%) and luxury fuel-powered vehicles (-31%). As a representative of joint-venture fuel-powered vehicles, Toyota's models, which are mostly fuel-powered, were particularly affected by high oil prices. Consumers prefer more fuel-efficient new energy vehicles.
3. New Energy Vehicles Taking Over the Market
In contrast to the plight of fuel-powered vehicles, 950,000 new energy vehicles were sold in May, with a market penetration rate of 62.9% (the proportion of new car purchases being new energy vehicles), exceeding 60% for two consecutive months. This means that six out of every ten car buyers chose new energy vehicles, further squeezing the market share of fuel-powered vehicles. Toyota has been slow to expand its new energy offerings (e.g., limited electric models and slower technological innovation compared to Chinese brands), allowing new energy vehicles to steal its customer base.
4. The Overall Decline of Japanese Cars
Toyota's situation is not isolated; Japanese car sales as a whole are on the decline. In May, Japanese brands sold 158,000 units in China, a year-on-year decrease of 35.3%, with their market share dropping to 10.5% (previously accounting for at least 20%). Nissan has been declining for seven years, Honda for five years, and Toyota has also seen continuous declines since 2023. The "golden age" of Japanese cars in China is over.
5. A Similar Trend for Imported Cars
The import car market is also experiencing a downturn: only 38,000 imported vehicles were sold in May, a year-on-year decrease of 19%. From January to May, a total of 160,000 imported cars were sold, a decrease of 11%. Even Lexus, Toyota's high-end import brand (the leading luxury import car), only sold 10,500 units in May, a year-on-year decrease of 38%. High oil prices and the rise of new energy vehicles have made domestic luxury new energy vehicles more appealing to consumers than expensive and fuel-intensive imported cars.
In One Sentence
Toyota's decline is a reflection of the end of the fuel-powered vehicle era and the rise of new energy vehicles, as well as the inevitable weakening of Japanese car brands in the Chinese market. High oil prices are merely a catalyst; the real reasons lie in changes in consumer preferences (a greater preference for new energy vehicles) and market dynamics (the rise of Chinese brands). Toyota and other Japanese cars have failed to adapt to these changes.