This paper uses the Taguchi method to optimize the manufacturing process and robust design of a low-cost permanent magnet motor with soft magnetic composite (SMC) cores. For the manufacturing process, SMC cores are produced by using the molding technology without any wire cutting costs. To maximize the relative permeability and minimize the core loss, the Taguchi method is employed to identify the best control factor values for the heat treatment of SMC cores based on a series of experimental results. Due to the manufacturing tolerances, there are significant uncertainties in the core densities and motor dimensions, which will result in big performance variations for the SMC motors in the batch production. To obtain a robust design less sensitive to these tolerances, the conventional Taguchi parameter design method and a sequential Taguchi optimization method are presented to maximize the average torque and minimize the core loss of a low-cost PM motor. Through comparison, it is found that the proposed optimization method is efficient. It can provide an optimal design with better motor performance and manufacturing quality. The proposed method will benefit the industrial production of cost-effective PM-SMC motors with robust and compact designs.