Toyota has set a new record for its annual net profit forecast, driven by strong sales globally in the first three quarters, with the global semiconductor shortage showing signs of easing.
The weakened yen is further contributing to Toyota’s success, resulting in an upgraded net profit projection of 4.5 trillion yen ($30 billion) for this fiscal year, up from the previous estimate of 3.95 trillion yen. In the third quarter, the company experienced a significant 86% year-on-year increase in net profit, reaching almost 1.36 trillion yen.
However, Toyota had to revise down its sales volume target for the fiscal year due to scandals involving manipulated engine and safety tests at its subsidiaries. Chief Financial Officer Yoichi Miyazaki attributed the backlog of vehicle orders in early 2023 to the global semiconductor shortage, prompting the company to reconsider its operational pace.
Despite these challenges, Toyota has successfully recovered in vehicle production from recent semiconductor and supply shortages, announcing record vehicle sales of 11.2 million units across its brands in 2023 last week, maintaining its position as the world’s leading automaker.
Testing irregularities at subsidiaries, particularly Daihatsu, are expected to impact sales in Japan. While sales are anticipated to grow in Europe and North America, a predicted reduction in domestic sales led Toyota to trim its 2023-24 sales volume from 9.60 million to 9.45 million.
In response to the global shift towards electric vehicles (EVs), Toyota is striving to catch up, with targets to sell 1.5 million EVs annually by 2026 and 3.5 million by 2030. The company also aims to mass-produce solid-state batteries for faster charging and increased EV range. Despite this emphasis on EVs, Toyota remains committed to hybrids, recognizing challenges faced by battery-powered engines, including limited range, charging infrastructure, resale values, and battery recycling.
Analysts, such as Tatsuo Yoshida from Bloomberg Intelligence, highlight that supply chain improvements, pent-up demand, and a weak yen are currently working in Toyota’s favor. However, concerns persist over the potential impact of scandals involving subsidiaries like Daihatsu and Hino, as well as Toyota Industries, on the overall performance of the company. Board chairman Akio Toyoda has publicly apologized for the scandals, expressing his embarrassment, and has pledged to oversee improvements to regain consumer trust.