Toyota Motor reportedly has forecast a 20% profit decline in the current financial year ending 31 March 2025 citing looming investment in both its suppliers and strategy after it delivered blockbuster fourth quarter earnings.
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Despite the leaner forecast, the automaker’s results smashed market expectations, Reuters said.
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Operating profit surged 78% in the January March quarter and, for the full year, reached JPY5.35 trillion (US$34.5bn), the first time a Japanese company topped JPY5 trillion, local media reported.
While Toyota has been boosted by a weaker yen, Reuters noted, it had also been a big beneficiary of cooling demand for electric vehicles in some markets, such as the US, where more customers are embracing petrol electric hybrids, Toyota’s traditional strength.
The Japanese automaker was long criticised for pursuing its “multi-pathway” strategy championing hybrids and plug-in hybrids as well as EVs, a stance that was increasingly looking prescient given consumer concerns about EV driving ranges and the availability of charging stations, Reuters said.
Toyota expected operating income to total JPY4.3 trillion for the year to March 2025, a 20% decline, as it invests in “human capital”, including providing support for labour costs at suppliers and dealers, as well as in its multi-pathway strategy.
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By GlobalData“We’ll make investments in order to firmly protect the supply chain,” Toyota CEO Koji Sato reportedly told a press conference after the earnings release.
“Even though our operations are run very efficiently, there are many things that still need to be changed to some extent,” he said, referring to shifts in the manufacturing process as Toyota makes the leap from automaker to mobility company.
Toyota said it planned to invest JPY1.7 trillion for growth this year in areas such as artificial intelligence and software, Reuters said.
“Guidance in profit seems disappointing,” James Hong, head of mobility research at Macquarie, told the news agency. “Additional cost for suppliers and investment is something unexpected.”
Reuters noted Toyota pioneered hybrids more than 25 years ago with the Prius and they made up more than a third of the 10.3m cars it sold in the financial year just ended, including Lexus.
Yet battery only EVs made up just 1% of Toyota’s global sales in the year just ended, or about 116,500 vehicles, well below a previously announced target of 202,000. It expects to sell 171,000 battery EVs in the current financial year.
The fate of its business in China is likely closely tied to its EV strategy, Reuters said. Toyota has said it would partner with Chinese technology giant Tencent and unveiled two battery EVs for China at the Beijing auto show last week.
