Toyota's sales in China tumbled 23 per cent in August, marking the seventh consecutive monthly decline for the world's largest car manufacturer as soaring fuel prices hammered petrol and hybrid vehicle sales. The prolonged slump represents the most severe performance for Toyota in the Chinese market for at least a decade. The Middle East conflict has spurred consumers toward electric vehicles, knocking the company's sales in China down almost 19 per cent to 927,866 vehicles in the first eight months of the year.

Toyota is pivoting its local strategy to a "China-for-China" model that uses more Chinese parts and technology suppliers and empowers domestic engineers to compete better against local EV rivals led by BYD. That strategy has shown some signs of success as battery electric sales in China rose 36 per cent in August. Its local joint venture partner GAC announced an agreement to acquire a 50 per cent stake in FAW Toyota, its other joint venture in the country, potentially paving the way for consolidation.

The Japanese automaker is also building its own factory in Shanghai to manufacture Lexus EVs, set to open next year, while embarking on its biggest factory overhaul investment programme in decades to modernize production facilities through robots. The challenge for Toyota in China reflects the broader ill health of the world's biggest auto market, where sales have shrunk 21.8 per cent this year to 13.4mn units.