Toyota nearly doubles Q1 profit, China remains challenging

by | Aug 1, 2023 | Business

TOKYO (Reuters) – Toyota nearly doubled its operating profit in the first quarter, the Japanese automaker said on Tuesday, helped by increased sales and productivity as well as the tailwind from the weaker yen.

“Sales volumes across all regions increased compared to the same period a year earlier due to productivity improvement efforts made together with suppliers,” the company said in its earnings announcement.

The world’s top-selling automaker said operating profit for the three months through June totalled 1.12 trillion yen ($7.85 billion), an increase of 94% from a year earlier, beating the average 945.22 billion yen profit estimate in a poll of 10 analysts by Refinitiv.

Last year’s operating profit was 578.66 billion yen in the first quarter.

Toyota maintained its forecast for a 3.0 trillion yen profit for the current year, as the conditions it faced had not changed greatly from three months earlier.

That forecast compared to a 3.6 trillion yen average forecast from 23 analysts. Toyota said it may consider a revision around the time of its half-year results.

Tuesday’s earnings are the Japanese auto giant’s first since it laid out an ambitious plan to better compete in the global market for battery-powered vehicles, as well as detailed its hydrogen strategy.

If it does not realise its plan, Toyota risks missing out on a rapid shift to electric vehicles in especially China, where the rise of local competitors and price cuts by Tesla and others are squeezing its market share.

Toyota said competition in China had become “extremely severe”, adding that foreign exchange rate fluctuations and its response to price cuts in the world’s top car market hurt its results there.

The automaker did not specify the measures it had taken, but many automakers have either cut vehicle prices or production costs to stay competitive in a market that has rapidly pivoted to electric vehicles.

Toyota has said it would strengthen development of EV technology in China and target significant cuts to manufacturing costs to become more competitive.

In North America, another key market, Toyota said it had benefited from pent-up demand among consumers as the impact of a post-pandemic chip shortage wanes.

Globally, the company sold some 2.53 million Toyota and Lexus luxury brand cars in the quarter, up 8.4% from a year earlier, with around 34% of those being hybrids and other electrified vehicles.

Performance in Japan was especially strong, with operating profit more than doubling from a year earlier to 700.7 billion yen, making up more than 60% of the overall operating profit as vehicle sales rose, helped by better supply of semiconductors.

Toyota shares, which were up 1.15% just before the release of the earnings, extended their gains immediately after and closed up 2.5% at 2,445.5 yen.

($1 = 142.7200 yen)

(Reporting by Daniel Leussink; Editing by David Dolan and Miral Fahmy)


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