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Technology

Technology

Toyota Anticipates Earnings Boost from Hybrids Amid Cooling EV Enthusiasm

Toyota Anticipates Earnings Boost from Hybrids Amid Cooling EV
FILE PHOTO: A view of the Toyota FT-3e elecric SUV concept vehicle during a press day of the Japan M... FILE PHOTO: A view of the Toyota FT-3e elecric SUV concept vehicle during a press day of the Japan Mobility Show 2023 at Tokyo Big Sight in Tokyo, Japan October 25, 2023. REUTERS/Issei Kato/File Photo
Toyota Anticipates Earnings Boost from Hybrids Amid Cooling EV
FILE PHOTO: A view of the Toyota FT-3e elecric SUV concept vehicle during a press day of the Japan M... FILE PHOTO: A view of the Toyota FT-3e elecric SUV concept vehicle during a press day of the Japan Mobility Show 2023 at Tokyo Big Sight in Tokyo, Japan October 25, 2023. REUTERS/Issei Kato/File Photo

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Toyota Anticipates Earnings Boost from Hybrids Amid Cooling EV Enthusiasm

Toyota Motor (7203.T) is anticipated to report robust annual earnings driven by solid demand for hybrids, showcasing its resilience amid shifting trends in the automotive industry. While the forecasted record profits underscore Toyota’s strength, it also highlights its significant hurdles in key markets.

In China, Toyota contends with intense price competition, while in the U.S., consumers grapple with rising borrowing costs, impacting purchasing decisions. Additionally, increased competition from Chinese automakers producing affordable vehicles poses challenges globally. A safety test scandal involving its Daihatsu compact car unit has further strained sales in Japan, tarnishing Toyota’s reputation for quality and safety.

Despite these challenges, Toyota raised its operating profit forecast for the fiscal year ended March 31, projecting a record profit of 4.9 trillion yen ($31.87 billion), an 80% increase from the previous year. Analysts expect a fourth-quarter operating profit of 747 billion yen, reflecting Toyota’s resilience amid market uncertainties.

Toyota’s strategy of prioritizing hybrids over battery electric vehicles (EVs) has proven successful. Hybrids constituted over a third of the company’s total sales in the previous fiscal year. The company’s emphasis on hybrids, known for their higher margins, has enabled it to capitalize on slowing global demand for EVs.

While Toyota leads in hybrids, it lags behind competitors like Tesla (TSLA.O) and European and Chinese automakers in the EV segment. Despite setting ambitious targets for EV sales, Toyota’s global battery EV sales only accounted for 1% of its total sales, falling short of expectations.

Toyota’s prospects in China hinge on its EV strategy, with Chinese consumers favoring software-rich vehicles. However, Toyota’s current software capabilities are perceived as lacking, potentially hindering its market penetration. Partnering with Chinese tech giant Tencent (0700. HK) and unveiling new battery EV models for the Chinese market demonstrate Toyota’s efforts to strengthen its position in this crucial market.

In the U.S., Toyota’s sales increased 20% over the first quarter, outperforming Japanese rivals but facing stiff competition from domestic and foreign automakers.

Despite these challenges, Toyota’s shares have soared, reflecting investor confidence in its resilience and long-term prospects. While its shares have outperformed Tesla’s in the past year, Toyota continues to navigate evolving market dynamics and technological shifts to maintain its competitive edge in the automotive industry.


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