TOKYO — Toyota Motor Corp. is expected to post its first profit drop in two years when it reports second-quarter earnings on Wednesday, signaling cooling demand after a run of robust earnings helped by lower-than-expected demand for 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 hybrids, which typically command higher profit margins than standard gasoline-powered vehicles.
Still, recent sales and production figures have indicated a modest slowdown for Toyota. It faced a delivery suspension of two models in the U.S. 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 percent 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 percent from a year earlier and that output declined 7 percent.
Toyota’s strategy to expand its hybrid lineup 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 percent of Toyota’s global sales in July-September, or 1.1 million vehicles, including the luxury Lexus brand, compared with 33 percent in the same period last year, according to company data.
Among legacy automakers, Toyota is considered one of the slowest to embrace EVs. Battery-only electric vehicles made up just 1.5 percent 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 percent decline compared to the previous financial year on expected investment in both its strategy and suppliers.
Shares of Toyota are up 3 percent so far this year. In U.S. dollar terms, they are up 2 percent, compared with a 2 percent drop in EV rival Tesla Inc. over the same period.
Source: Automotive News, November 5, 2024