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Every week, Roula Khalaf, the Editor of the Financial Times, handpicks her favorite articles for this newsletter.
Toyota has adjusted its profit outlook for the year, thanks to savings on production costs. This comes despite a dip in quarterly profits for the second time in a row, as the initial surge from hybrid vehicle sales starts to balance out.
On Wednesday, the automotive giant announced an operating profit of ¥1.2 trillion ($7.9 billion) for the December quarter, marking its fiscal third quarter. This is a 27% decrease from the same period last year and unfortunately did not meet analysts’ expectations.
Nevertheless, Toyota raised its full-year operating profit forecast by ¥400 billion ($2.6 billion) to ¥4.7 trillion. This optimistic adjustment reflects its efforts to bolster product appeal and manage supplier expenses effectively.
Securing its position at the top for a fifth consecutive year, the Japanese automaker sold 10.8 million vehicles in 2024, though this was a slight decline from the 11.2 million sold the previous year.
The third-quarter results, however, highlight a decline in demand and increasing pressure from Chinese competitors like BYD, which have also affected players such as Volkswagen, Nissan, Stellantis, and even led to underwhelming sales numbers for Tesla.
While foreign car manufacturers are generally scaling back their presence in the Chinese market due to stiff local competition, Toyota is bucking the trend by ramping up its involvement.
This was evident on Wednesday when Toyota introduced a new battery and electric vehicle company in Shanghai. The venture will eventually produce 100,000 units, starting with the Lexus brand, and aims to commence production by 2027.
Following the announcement of the increased profit forecast, Toyota’s shares edged up by 1.4%.
Toyota’s hybrid vehicles have particularly appealed to American consumers over the past three years, providing a boost even as the company navigates a post-record earnings phase. Sales during the first half of the financial year were dented by certification issues with its Hino Motors subsidiary.
All eyes are now on Toyota’s strategies for production and investment in North America, as it operates significant plants in Canada and Mexico. A potential challenge will be how they handle the risk posed by possible US tariffs.
In support of its endeavors in the US, the company contributed $1 million to Donald Trump’s presidential inauguration and announced a robust investment plan of $10 billion in US manufacturing. Additionally, Toyota is preparing to commence initial shipments from its North Carolina battery plant, the company’s first facility outside Japan, having invested nearly $14 billion in its construction.
