Toyota extends output cut at Chinese JV to ease dealer pressure

SHANGHAI (Reuters) - Japan's Toyota Motor has told dealers that it will extend a plan to reduce output at one of its joint ventures in China, where it faces rising competition.

The cut, which was initially for October and November, will be extended by three months, Toyota's joint venture with China's state-owned FAW Group said in a letter dated Nov. 3, which was seen by Reuters and verified with one of the dealers.

Its aim is to ease inventory pressure on dealers and ensure they can operate well in the "severe market environment".

"Production from December to February next year will continue to be reduced by a large amount," FAW Toyota said.

As a result, car sales to Toyota dealers would be reduced to 66,000 units in December, 60,000 units in January and 38,000 units in February, it added in the letter.

Toyota declined to comment on its production or the letter.

While Toyota has avoided the kind of hit other Japanese automakers such as Nissan Motor Honda Motor have taken in China from a shift to electric vehicles and the rise of domestic brands, it still faces pressure in the world's biggest auto market.

Chinese rivals such as BYD have been gaining market share, with plug-in hybrids and pure electric cars at competitive prices.

In July, Toyota also terminated early the contracts of about 1,000 dispatch workers at its joint venture with Guangzhou Automobile Group (GAC), due to production levels.

Toyota, ranked third in sales after BYD and Volkswagen in China, sold 1.265 million cars to dealers in the first nine months, data from China Association of Automobile Manufacturers showed, down 9% from the same period a year ago.

The CAAM data does not include imported cars.

By comparison, BYD's sales rose more than 60% in the period.

(Reporting by Zhang Yan, Brenda Goh; Additional reporting by Daniel Leussink in Tokyo; Editing by Alexander Smith)