Toyota to gain upper-hand as EV market slumps

Toyota Motor is expected to get increased demand for hybrids when it reports annual earnings on Wednesday, showing how the top-selling automaker is set to benefit as the hype around battery electric vehicles cools.

This is due to a boost from the weak yen currency debunking the challenges it faces in the critical markets. Whereas in China, it faces pressure because of an aggressive price war, and in the U.S. its due to the fallout from consumers struggling with higher borrowing costs.

Worldwide, Toyota has felt slight competition from Chinese rivals constantly expanding production of low-priced vehicles.

The group’s reputation for quality and safety was threatened, while the sales were also affected due to a safety test scandal at its Daihatsu compact car unit in Japan.

Toyota's China sales were down 1.6% over the first quarter of the 2024 calendar year, better than sharper declines of Japanese rivals Nissan and Honda, however worse than a 12.5% rise in passenger vehicle sales sector-wide, according to data from an auto industry association.

As global demand for battery-powered EVs has slowed, Toyota has made money by selling more hybrids, which come with relatively higher margins than regular gasoline cars.

Toyota pioneered hybrids more than a quarter of a century ago with the Prius. They made up more than a third of the 10.3 million cars it sold in the financial year just ended, including the Lexus luxury brand.

While strong in hybrids, Toyota remains a laggard when it comes to EVs, behind rivals such as Tesla and European and Chinese automakers.

Battery EVs made up just 1% of global sales in the year just ended, or about 116,500 vehicles, well below a previously announced target of 202,000 vehicles.

In February, the Japanese automaker raised its operating profit forecast for the financial year ended March 31 to 4.9 trillion yen ($31.87 billion), a result that would mark a record profit and an 80% increase on the previous year.

For the fourth quarter, Toyota is expected to deliver an operating profit of 747 billion yen, according to the average of nine analysts polled by LSEG.

(With inputs From Reuters)