Posted By Global Banking and Finance Review
Posted on March 5, 2025
TOKYO (Reuters) - Toyota Motor is increasingly focusing on return on equity as a performance measure, talking internally about raising ROE to 20% as one guideline, a senior finance executive at the Japanese automaker said during an interview on Monday.
While cautioning that ROE is not a perfect measure, the executive emphasised consistency over time-bound targets, adding that Toyota was not looking to formally commit to achieving a specific level by a certain date.
"What's important isn't just reaching a certain percentage by a specific time, but maintaining it consistently," said Masahiro Yamamoto, chief officer of Toyota's Accounting Group.
ROE is a ratio that measures a company's profitability relative to its shareholders' equity. Toyota's ROE reached 15.6% for April-December 2024, in line with the 15.8% for the 2023 fiscal year. The metric has increased from 9.0% in fiscal 2022 and 11.5% in the financial year before that.
Toyota has long been working to improve its profit margin by reducing the cost it takes to produce its vehicles, thereby lowering the break-even point for its consolidated sales volume.
Speaking before the U.S. imposed 25% tariffs on imports from Mexico and Canada on Tuesday, Yamamoto said Toyota - which has assembly plants in both targeted countries - would provide information about the impact of tariffs once it was able to.
Last month, Toyota said a nearly $14 billion factory in North Carolina - its 11th U.S. manufacturing plant - was ready to begin production, with battery shipments for electrified vehicles including hybrids starting in April.
(Reporting by Daniel Leussink; Editing by Christopher Cushing)