Toyota announces disappointing targets that overshadow record year

Toyota announces disappointing targets that overshadow record year
Toyota announces disappointing targets that overshadow record year

A record profit, even if it is 30 billion euros, is not necessarily enough to make investors happy. The latter thus displayed their disappointment this Wednesday at the announcement of the results of the Japanese giant Toyota: its record performances over the past financial year were eclipsed by the announcement of a marked decline in profits for the 2024 financial year. 2025 due to heavy investments.

Toyota, however, doubled its net profit during the 2023-2024 financial year, ended March 31, compared to the previous one, reaching a new record level of 4.945 billion yen (29.7 billion euros). Operating profit has also doubled in the space of a year to exceed the 5,000 billion yen mark for the first time.

The world automotive leader, which includes the Toyota, Lexus, Daihatsu and Hino brands, has notably benefited from the surge in its sales of hybrid vehicles and the fall of the yen, which artificially inflates its results abroad. And it benefited from a favorable base effect compared to its 2022-2023 results, which had been disrupted by the global shortage of semiconductors and a surge in raw material costs.

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Hybrids weigh more and more

Turnover increased by 21%, driven by the electric and hybrid-electric ranges. The number of these vehicles sold thus jumped by more than 35%, far ahead of other categories. They now represent more than a third of sales. Although Toyota’s 100% electric global sales have tripled over one year, they still remain modest, with 117,000 vehicles. A figure to be compared to the 3.7 million hybrid vehicles sold by the group over the same period.

Sales of hybrid vehicles were driven by particularly dynamic markets in North America, Europe and Japan. And in China, where all foreign car manufacturers are struggling to remain competitive against local competitors that have become formidable and electric champions like BYD, Toyota resisted by achieving a small increase in its volume sales.

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Future drop in profits

But this good news for the Japanese manufacturer was therefore largely tarnished by its forecasts. It thus announced that its net profit should fall by 28% in 2024-2025, to 3,570 billion yen (21 billion euros all the same). And the group also expects a pronounced decline in its annual operating profit, of almost 20%.

Because Toyota plans to invest 2,000 billion yen (12 billion euros) during its new financial year to support its future growth, in new engines (electric, hydrogen) and digital technology (software, artificial intelligence), as well as in human capital, including for its suppliers and dealers with whom it cultivates very close ties.

Turnover should still increase slightly, but by barely a few percent, far from the surges of the past financial year. Toyota even expects a slight decline in its global sales volume and thus to fall below the 11 million vehicle mark. In particular, it expects a decline in sales in Japan of its subsidiary Daihatsu, affected since the end of last year by a scandal of irregularities in the certifications of its vehicles on the Japanese market.

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The Chinese electricity threat

Above all, Toyota feels seriously threatened in China, and this is one of the reasons why it has decided to invest so much in new technologies for its next financial year. “We have to accept that there are some areas where we are significantly behind” Chinese manufacturers, admitted Yoichi Miyazaki, executive vice-president of Toyota, at a press conference on Wednesday. “We know we cannot let this gap widen any further” he added, stressing that the price war imposed by Chinese manufacturers “becomes more and more severe every day”.

The group launched into the electric segment later than other major manufacturers and continues to focus on other engines in parallel, to adapt to the different degrees of energy transition in the world. If this strategy allows it to better diversify risks, it at the same time requires it to continue to invest on all fronts.

To protect its shareholders, Toyota also announced on Wednesday a giant plan to buy back its own shares for a maximum of 1,000 billion yen in 2024-2025 (6 billion euros at the current price) and a 25% increase in its dividends for last financial year, at 75 yen per share. But that did not prevent its action from ending the session slightly in the red (-0.55%) on Wednesday on the Tokyo Stock Exchange.

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