Toyota Motor Corporation has decided to compensate parts manufacturers for losses amounting to tens of billions of yen (hundreds of billions of won) after abruptly halting the development of its next-generation electric vehicle (EV).

According to the Nihon Keizai Shimbun on Friday (July 3), Toyota recently notified its suppliers that it has canceled the development of the LF-ZC, a next-generation sedan EV for its luxury brand, Lexus.

The vehicle was set to introduce the "gigacasting" process, which involves molding the car body in a single piece using large casting equipment.

The decision has dealt a direct blow to parts suppliers that had been making large-scale facility investments, such as building dedicated production lines.

With some companies facing losses of up to 10 billion yen (approximately 95.4 billion won) each, Toyota has stepped in to cover total losses in the tens of billions of yen.

The reasons cited for the development halt include a deteriorating market environment—such as moves in the United States to repeal EV tax credits and the easing of internal combustion engine regulations in Europe—as well as profitability issues, including difficulties in mass production and high defect rates associated with the new technology.

Toyota plans to apply the technology accumulated during the development process to future vehicle models.

Recently, a sentiment of "adjusting the pace" by re-evaluating EV strategies has been spreading across the global automotive industry.

Honda also halted the development of three EV models, including its flagship EV, in March and began compensation procedures for its suppliers.

(Photo: AP, Yonhap News)