Business
Toyota to post first profit drop in 2 years as demand cools after big run
Global Banking & Finance Review®
Company
By Daniel Leussink
TOKYO (Reuters) – Toyota Motor is expected to post its first profit drop in two years when it reports second-quarter earnings on Wednesday, signalling cooling demand after a run of robust earnings helped by a consumer shift away from electric vehicles.
The world’s largest automaker is nonetheless expected to deliver almost $8 billion in quarterly operating profit, benefiting as drivers in several major markets opt instead for petrol-battery hybrids, which typically command higher profit margins than standard petrol cars.
Still, recent sales and production figures have indicated a modest slowdown for Toyota. It faced a delivery suspension of two models in the United States and, like global rivals, is dealing with fierce competition in China, the world’s biggest auto market and one where demand for EVs has not cooled.
The Japanese automaker is expected to report a 14% year-on-year operating profit decline in July-September, to 1.2 trillion yen ($7.9 billion), according to the average of nine analyst estimates in an LSEG poll.
That would mark its first profit decrease since the same quarter in 2022. It has already said quarterly global sales shrank 4% from a year earlier and that output declined 7%.
Toyota’s strategy to expand its hybrid line-up in the U.S. might make it less exposed to any reduction in EV subsidies or similar potential policy changes in Washington depending on the outcome of this week’s U.S. presidential election.
Hybrids accounted for 41% of Toyota’s global sales in July-September, or 1.1 million vehicles, including the luxury Lexus brand, compared to 33% in the same period last year, according to company data.
Among legacy automakers, Toyota is widely considered one of the slowest to embrace EVs. Battery-only electric vehicles made up just 1.5% of its global sales in the first nine months of the year.
Toyota Chairman Akio Toyoda argued last month that an EV-only future would lead to job losses across the auto industry.
Toyota kept its full-year profit estimate unchanged when it reported earnings for the April-June quarter, forecasting a 20% decline compared to the previous financial year on expected investment in both its strategy and suppliers.
Shares of Toyota are up 3% so far this year. In U.S. dollar terms, they are up 2%, compared to a 2% drop in EV rival Tesla over the same period.
($1 = 152.1200 yen)
(Reporting by Daniel Leussink; Editing by David Dolan and Christopher Cushing)
Operating profit is the income generated from a company's core business operations, excluding deductions of interest and taxes. It reflects the company's efficiency in managing its operations.
Petrol-battery hybrids are vehicles that combine a traditional internal combustion engine with an electric motor, allowing for improved fuel efficiency and reduced emissions compared to standard petrol cars.
Year-on-year profit decline refers to a decrease in a company's profit when comparing the same quarter or period from one year to the next, indicating potential challenges in business performance.
Global sales refer to the total revenue generated from selling products or services across all international markets, reflecting a company's worldwide market reach and performance.
The electric vehicle market encompasses the production, sale, and use of vehicles powered entirely or partially by electricity, which are increasingly popular due to environmental concerns and advancements in technology.
Explore more articles in the Business category
