Toyota Motor Corp. has reported higher-than-expected quarterly profits as the availability of semiconductors improved and a weak yen allowed the company to capitalize on the global resurgence in demand for vehicles. The announcement has led to a surge in the company's stock, which closed at a record high.
For the three months ending in June, Toyota reported a record operating profit of ¥1.1 trillion ($7.7 billion), surpassing analysts' estimates of ¥880 billion. The strong profit performance was aided by the robust demand for automobiles following the pandemic-induced downturn, prompting carmakers to ramp up production and increase prices. In fact, Toyota set a new record for the number of vehicles manufactured and sold in June. Recent reports also suggest that Toyota is on track to further increase production between August and October.
Analysts were surprised by Toyota's decision to maintain its outlook for operating income for the fiscal year at ¥3 trillion, considering factors such as exchange rates, production levels, and the overall market environment. Bloomberg Intelligence analyst Tatsuo Yoshida interpreted this as a positive sign for the company.
Net sales for the first quarter of the fiscal year rose by 24% to ¥10.6 trillion, exceeding the predicted ¥9.8 trillion. Toyota also maintained its revenue outlook for the full year at ¥38 trillion.
The positive financial results have driven Toyota's share price to new heights. The company's shares rose by 2.5% in Tokyo, building on the 3.3% gain from the previous day, reaching ¥2,445.5 per share – a record high based on data compiled since 1974. It is worth noting that this share price reflects a five-for-one stock split that took place in October 2021.
Toyota attributed its ability to command higher prices for vehicles as a factor that helped "mitigate the impact of the sharp rise in materials prices."
However, concerns have been raised about Toyota's declining business in China, a significant market for the company. Bloomberg Intelligence analyst Tatsuo Yoshida highlighted this as an industry-wide issue but specifically concerning for Toyota. Despite this, Toyota recently announced plans to boost its competitiveness in China, such as by accelerating the development of an electric powertrain with its primary suppliers, Denso Corp. and Aisin Corp.
As the pressure intensifies for automakers to transition away from fossil fuels and embrace electric vehicles (EVs), Toyota has committed to expanding its EV production while continuing to offer a wide range of hybrid and gasoline cars. Under the leadership of CEO Koji Sato, Toyota aims to sell 1.5 million battery EVs annually by 2026 and 3.5 million by 2030. Additionally, the company has set targets to halve its carbon dioxide emissions by 2035 and achieve carbon neutrality by 2050.
In line with these goals, Toyota sold 29,000 battery EVs during the last quarter, a significant increase from the previous year, with most sales occurring in Asia and Europe. The company plans to further increase its sales of EVs in the second half of the year. Toyota has also committed to investing ¥3.1 trillion in sustainable growth initiatives, including efforts to decarbonize and electrify.