Toyota Motor Corp. (7203.T) has raised its full-year operating profit forecast by 9%, signaling confidence in its ability to navigate potential U.S. tariffs and sustain strong performance despite recent earnings setbacks.
The world’s top-selling automaker revised its profit projection for the fiscal year ending March 2025 to 4.7 trillion yen ($30.7 billion), up from its previous estimate of 4.3 trillion yen. Toyota attributed the revision to strategic efforts aimed at strengthening earnings, including price increases, production stabilization, and controlled incentive spending. The company also expects to benefit from a weaker yen, which enhances the competitiveness of its exports.
Earnings Performance and Market Dynamics
Despite the optimistic forecast, Toyota reported weaker-than-expected earnings for its third quarter, marking a second consecutive decline in quarterly profits. Operating profit for the three months ending December totaled 1.22 trillion yen, a 28% drop from the previous year. This figure fell short of analyst expectations, which had projected an average of 1.42 trillion yen, according to a poll conducted by LSEG.
Toyota’s recent profits have been buoyed by strong demand for its hybrid vehicles, particularly in the U.S. and other key markets. However, regional earnings showed mixed results.
North America and China Performance
Operating income in North America, Toyota’s largest market by vehicle sales, dropped by 63% over the first nine months of the fiscal year. The decline was primarily due to lower sales volumes and increased labor-related costs. Meanwhile, Toyota’s operating income in China also declined, impacted by rising marketing expenses as the company worked to maintain its market share against intense competition from local brands.
Expansion Plans in Electric Vehicles
Toyota announced plans to establish a wholly owned subsidiary in Shanghai to develop and manufacture electric vehicles (EVs) and batteries for its premium Lexus brand. The new venture is set to begin production in 2027, with an initial manufacturing capacity of approximately 100,000 units annually. This move is part of Toyota’s broader strategy to expand its presence in the EV market, particularly in response to increasing demand and regulatory shifts favoring electric mobility.
Global Sales Leadership and Stock Market Reaction
Last week, Toyota reported total global group sales of 10.8 million vehicles for 2024, maintaining its position as the world’s best-selling automaker for the fifth consecutive year. The strong sales performance reaffirms Toyota’s dominance in the global automotive industry despite challenges posed by shifting market conditions and supply chain disruptions.
Toyota’s stock price saw a brief dip immediately following the earnings announcement but rebounded quickly. As of 05:21 GMT, shares were trading 4.7% higher at 3,008 yen, reflecting investor confidence in the company’s long-term strategy and profitability.
Toyota remains focused on enhancing its operational efficiency and expanding into new market segments while navigating economic uncertainties and evolving industry trends.
