Toyota Motor is set to release its second-quarter earnings on Wednesday, marking its first profit dip in two years due to a dip in global demand and intensifying competition in key markets. Despite this, the automaker is on track to report a healthy quarterly operating profit of approximately $8 billion, largely supported by strong sales of petrol-electric hybrids.
In the July-to-September period, hybrids accounted for 41% of Toyota’s total sales, a significant rise from 33% during the same period last year. However, the increase in hybrid sales—a category that traditionally yields lower profits—has not fully offset the overall decline in demand. Toyota’s global sales dropped by 4% year-on-year, and production fell by 7% in the quarter. Additionally, the company is grappling with challenges in the U.S. market, where deliveries for two models were recently suspended.
Toyota’s operating profit is anticipated to decline by 14% year-on-year for the second quarter, amounting to 1.2 trillion yen ($7.9 billion). This dip highlights the impact of Toyota’s strategy to prioritize hybrid vehicles over fully electric models, a decision that may offer the automaker some insulation from potential shifts in U.S. policies around electric vehicle (EV) subsidies, which are currently under scrutiny ahead of the upcoming presidential election.
While Toyota remains cautious about a potential slowdown, the company faces stiff competition in China, the world’s largest automotive market, where demand for EVs remains robust. Toyota, which has been slower than other traditional automakers in fully embracing EVs, saw EVs make up just 1.5% of its global sales in the first nine months of the year. Toyota’s chairman, Akio Toyoda, has voiced concerns that an EV-only future could lead to significant job losses within the auto industry.
Despite the anticipated profit drop, Toyota’s stock has risen 3% this year, outperforming EV competitor Tesla, whose shares have declined by 2% in the same timeframe. The profit dip and increased reliance on hybrids underscore Toyota’s cautious transition toward an EV future in an increasingly competitive global market.
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