Toyota Motor Corporation is poised to announce its first profit decline in two years during its second-quarter earnings report set for Wednesday. This downturn signals a cooling demand after a period of strong earnings, driven in part by consumer preferences shifting away from electric vehicles (EVs).
Despite this anticipated dip, the world’s leading automaker is expected to report an operating profit of nearly $8 billion for the quarter, thanks to a growing preference among consumers in key markets for petrol-battery hybrids, which typically yield higher profit margins than conventional petrol vehicles.
However, recent sales and production data suggest a slight deceleration for Toyota. The company faced a delivery halt on two of its models in the U.S. and, like its global competitors, is grappling with intense competition in China, the largest automotive market, where demand for EVs remains robust.
Analysts predict that Toyota will report a 14% year-on-year decline in operating profit for the July-September period, estimating it will fall to 1.2 trillion yen (approximately $7.9 billion), according to a survey of nine analysts conducted by LSEG. This decline would mark the first profit decrease since the same quarter in 2022. The company has already disclosed a 4% drop in quarterly global sales compared to the previous year, alongside a 7% reduction in production.
In response to shifting market conditions, Toyota’s strategy to broaden its hybrid vehicle lineup in the U.S. could reduce its vulnerability to potential cuts in EV subsidies or other policy changes, particularly as the results of the upcoming U.S. presidential election are anticipated.
Hybrids constituted 41% of Toyota’s global sales during the July-September quarter, amounting to 1.1 million vehicles, including those under the luxury Lexus brand. This is an increase from 33% in the same quarter last year, based on company data.
While Toyota has historically been viewed as a slower adopter of EV technology among traditional automakers, battery-electric vehicles accounted for only 1.5% of its global sales in the first nine months of the year. Chairman Akio Toyoda emphasized last month that a shift to an EV-only future could result in significant job losses across the automotive industry.
When Toyota reported its earnings for the April-June quarter, it maintained its full-year profit forecast, projecting a 20% decline compared to the prior financial year due to anticipated investments in both its strategy and its suppliers.
As for the stock market, Toyota shares have increased by 3% this year, and when evaluated in U.S. dollars, they have risen by 2%. In contrast, Tesla, a rival in the EV sector, has seen its shares drop by 2% over the same period.
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