Toyota Motor has reported a remarkable surge in its second-quarter profit, more than doubling its earnings while significantly revising its full-year outlook. The substantial boost in profit is attributed to a weaker yen currency that has amplified the impact of robust global sales.
The world’s top-selling automaker, unveiled a record operating profit of 1.44 trillion yen ($9.5 billion) in the quarter ending September, marking a 155.6 per cent increase from the previous year.
This surge in earnings is driven by increased sales across all global regions, encompassing the United States, Asia, and Toyota’s home market. Over the first six months of this fiscal year, Toyota witnessed a surge in car sales when compared to the same period a year earlier, reaffirming its strong position in the global automotive market.
While Toyota has faced criticism for its perceived hesitance in embracing battery electric vehicles (EVs), the company embarked on a significant overhaul of its EV strategy in June. Toyota made a substantial commitment to enhance the driving range and reduce the costs of electric vehicles.
Market sentiment appears to be rallying around this new strategy, and Toyota is experiencing renewed interest in its line-up of gasoline-electric hybrids. This resurgence in hybrid interest coincides with a recent decline in enthusiasm for pure EVs, particularly in the United States, where consumers grapple with higher financing costs.
Hybrids continue to make up over 90 per cent of Toyota’s electrified car sales. In the quarter ending September, hybrid sales experienced a substantial 41 per cent increase, totalling 888,000 vehicles. This surge in hybrid sales indicates the continued demand for these vehicles, which tend to be more cost-effective than some battery-powered EVs.
Despite Toyota’s performance, analysts have highlighted a set of challenges that lie ahead, particularly in the Chinese market. In China, the rapid ascent of domestic EV manufacturers and the swift transition to battery-powered vehicles have posed difficulties for companies like Nissan Motor and Honda Motor.
According to Reuters, Chief Financial Officer Yoichi Miyazaki acknowledged that China is currently experiencing a “very severe price competition,” particularly concerning battery EVs.
Additionally, Toyota faces competitive challenges in Southeast Asian markets such as Thailand, where a surge in Chinese investments, driven by the increasing demand for EVs, has led to intense competition.
Despite this, Toyota is determined to navigate these competitive landscapes as it aims to further its growth plans. The company recently announced an $8 billion boost in investment in a North Carolina plant focused on manufacturing batteries for hybrids, plug-in hybrids, and full-battery vehicles.
Toyota’s second-quarter results have led to an upward revision of its full-year profit forecast. The company now expects a full-year profit of 4.5 trillion yen, up from the previous projection of 3 trillion yen. The favourable impact of foreign exchange rates, attributed to a weaker yen, plays a significant role in this revised profit outlook.
The company assumed an average rate of 141 yen per dollar for its calculations for the 2023-24 financial year, compared to the previous rate of 125 yen per dollar.
Additionally, Toyota has announced a 100 billion yen share buyback program, and its shares gained 4.7 per cent following the release of these results, contributing to a 2.4 per cent increase in Japan’s benchmark Nikkei index.
(With inputs from Reuters)