DEMAND for hybrids is likely to deliver another quarter of double-digit growth for Japan’s Toyota Motor when it reports earnings on Thursday (Aug 1), although it is expected to show signs of slowing after a run of record profits.
Analysts will be paying close attention to how much momentum the world’s top-selling automaker has lost from previous quarters, given challenges such as a tough market in China and fallout from a certification scandal.
Sales data already give a hint of the potential slowdown. Toyota’s global sales declined 2 per cent in April to June versus a year earlier as robust US and European demand was not enough to make up for declines at home and in China.
For the April to June quarter, Toyota is expected to deliver a 20 per cent rise in operating profit to 1.3 trillion yen (S$11.4 billion) the average prediction of six analysts shows, as per LSEG.
That would be the company’s weakest profit growth since July to September 2022. The automaker has already forecast a 20 per cent decline in full-year profit, citing looming investment in both its strategy and suppliers.
Toyota has benefited from a slowdown in global demand for electric vehicles (EVs), allowing it to sell more hybrids, which typically command higher margins than regular petrol cars.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The company’s inventories in the US are also tight, reducing the risk of incentive spending to entice customers to buy cars, said James Hong, head of mobility research at Macquarie.
“You basically have one of the largest market players with the lowest level of inventory,” he said, adding that, together with the company’s growing hybrid offering, was likely to help keep earnings at a high level.
Hybrids made up 39 per cent of Toyota’s global sales in the first six months of the year, or 1.9 million vehicles, including the luxury Lexus brand, according to company data.
The strategy to boost hybrid sales in the US over the short term instead of battery EVs might also shield it from potential changes in US government policy on EVs.
Former president Donald Trump, the Republican candidate in the US presidential election, has said he would end the government EV mandate if he wins.
Shares of Toyota are up 13 per cent so far this year but have not performed well over the past months, coming down 25 per cent from a peak in late March.
In US dollar terms, they are up 6 per cent, compared to a 10 per cent decline in Tesla over the same period.
Toyota’s strong financial performance and gains in its share price belie pressure that chairman Akio Toyoda has faced over certification irregularities at Toyota Group companies and the automaker itself.
In an interview published on Monday, the grandson of the company’s founder said he may not be re-elected as a board director if shareholder support for him, which slid to 72 per cent this year from 85 per cent in 2023, continues to fall at the pace it did.
While strong in hybrids, Toyota still trails behind rivals such as Tesla and European and Chinese automakers when it comes to EVs, which accounted for only 1.5 per cent of its global sales in the first half of the year.
Toyota’s China sales were down 11 per cent to 785,000 vehicles over the first six months of 2024, compared to a 14 per cent gain to 1.2 million vehicles in the US over that period. REUTERS
