Toyota will axe up to 100 jobs and must slash the cost of building cars in Australia to ensure the future of its local manufacturing operations.
The company will call for voluntary redundancies at its Altona plant in Melbourne, where it currently employs about 2500 people, with the jobs to be go by the end of November.
In December it will cut production from 470 to 430 vehicles a day in response to a major fall in demand from the Middle East.
Toyota has recently built about 100,000 cars a year in Australia with 70 per cent of those destined for export markets.
The job losses are another blow to Australia's struggling auto sector and put further pressure on the federal government to maintain or even increase financial support.
More worrying is Toyota's need to cut the cost of building each car in Australia by $3800 by 2018 in order for its local manufacturing to remain viable.
Executive vice president Dave Buttner says Toyota has a long-term vision to continue as a local producer but must make savings.
"We've just got to keep working hard to reduce our overall cost base," Mr Buttner said.
"That's the key to our ongoing sustainability as a manufacturer."
Toyota has not asked the federal government for more financial assistance and will work with the commonwealth on key issues affecting the automotive sector.
Cost cuts made so far will allow Toyota Australia to proceed with the next facelifts on its current cars, both for the domestic and export markets.
Its next hurdle is to secure the next generation of locally-manufactured product.
"Because of the long-term nature and lead times in our industry, those decisions will be happening some time throughout 2014," Mr Buttner said.
Toyota's latest job cuts follow a move by the company to axe 350 jobs in April last year, Holden's decision to cut 400 jobs earlier this year amid ongoing fears for the future of its local operations, and Ford's plan to close its manufacturing operations by 2016.
ACTU president Ged Kearney said the job losses were "terrible news" for an industry that was doing it tough but was vital to Australia and deserved ongoing assistance.
Labor industry spokesman Kim Carr said the cuts should remind the government of the cost pressures facing the car industry.
"If we want to see major employers like our car makers stay in business, providing jobs for Australians, we need to back them," he said.
Industry Minister Ian Macfarlane said the federal government remained committed to working with the car industry on the challenges it faced and said the government's plans for a productivity commission review of the sector were proceeding."This is a difficult time for affected workers at Toyota," he said.