"We have the better product": Toyota mic-drops on Chinese cars like BYD Atto 3, MG ZS and Haval H6, but says the Japanese giant can't compete on price

Toyota has issued a mic-drop on its Chinese challenger brands, suggesting its vehicles are simply better than those being produced by brands like BYD, MG, Haval and others, but says it can't keep up with its rivals' ever-sharpening pricing.

Speaking to US outlet Automotive News, Ted Ogawa, the CEO of Toyota Motor North America, says that dealers are forever hounding him on how the Japanese giant will keep its Chinese rivals at bay.

For that, the Toyota executive has a very simple answer.

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"Our dealers ask us every day how we will (stay ahead). We have the better product," he says.

"However, it's still uncertain how to keep competitiveness in terms of MSRP or the price area."

Mr Ogawa was discussing the impact on Chinese brands on the US market, and specifically plans to build vehicles in Mexico to circumvent America's trade tariffs, which will hit 100 per cent from August on electric vehicles imported from China. Batteries and other components from the country will get a big bump too.

The Toyota executive said China's global automotive push was being driven by a slowing domestic economy, creating "pressure" to move a "huge extra capacity".

"China's economy is very much slowing down, that's why they have huge extra capacity, so they have much pressure. It's not only Mexico and Canada, but Latin America, Asia and Europe as well," he told Automotive News.

"What happened in Mexico, for example: Their products are so competitive, including any tariffs. They are a very low price.

"But China also saw its labor costs increasing and its material costs as well. That's why some day, they will be in the same condition.

"Chinese products are very much improving. I test-drove a Chinese vehicle in Japan, and while it is a different taste, it is very much getting better than what it was in the past."

In Australia – where existing Chinese brands like MG, Haval and BYD are set to be joined newcomers like Leapmotor, GAC and Geely – Chinese brands are forecast to account for some 40 per cent of new-car sales by 2030, causing the market here to "change dramatically".

"There will be some successes, and there will some failures. Will it affect some of the legacy brands that are in Australia? I think probably yes. People hate the status quo changing, but guess what? It's going to change. And I think it's going to change dramatically," Kia Australia CEO Damien Meredith recently told CarsGuide.