Toyota Motor Corp on Wednesday, May 10, 2023, projected that its operating profit will climb by 10% this business year which ends in March 2024. The automaker also expects its sales of pure electric vehicles to jump five-fold as the global supply chain disruption from chip shortage eases.
The company’s new CEO Koji Sato unveiled the growth plan and displayed body language that suggests a more aggressive push toward electrification. Toyota has previously chased a go-slow approach toward the electrification of its fleet, arguing its strategy will give consumers more choices.
The Japanese automaker projects all-electric sales, including those of its luxury Lexus brand, would hit 202,000 globally by March 2024—a quantum jump from the 38,000 units it sold last year. The largest automaker by sales also projects a rise in operating profit to 3 trillion yen ($22.2 billion) within the same period.
The forecast is coming at a time when its operating profit for the fourth quarter of last year ending March 2023 grew by over a third to $626.9 billion yen. This figure surpassed the average 553.46 billion yen profit forecasted by 10 analysts as revealed by Refinitiv data.
Toyota’s strategy has left it lagging behind in China, the largest auto market in the world, where brands like BYD Co Ltd have been more aggressive with battery EVs, eating into the market share of established foreign brands. However, Sato claimed the demand for all-electric vehicles in China is a new need that is different from the demand for hybrid vehicles.
“We would like to work on both sides,” Sato said.
Toyota’s profit goal is bolstered by a weak yen which boosts the value of overseas sales as well as the company’s higher output volumes which overshadow the impact of rising material costs. Due to the impact of the weak yen, Toyota’s revenue for the business year ending March 2023 rose to a record 37.15 trillion yen.
Toyota’s EV target is still far behind Tesla
Toyota’s projected EV sales are still a small fraction of Tesla which sits at the top of market shares outside China. However, it will see Toyota’s battery-powered vehicles make up nearly 2% of total sales volume, up from 0.4% of its total vehicle sales in the previous fiscal year.
“We expect an increase in [total] sales volume in all regions and production volume of 10.1 million [units], due to such factors as … improvement in semiconductor supply,” the Japanese automaker revealed in a statement.
In a frantic effort to regain market share in the EV sector that has been dominated by Tesla and Chinese automakers, Toyota said it will flood the market with 10 new all-electric vehicles. The automaker has also set the lofty target of selling 1.5 million EVs annually by 2026 and 3.5 million by 2030.
The company’s CEO said Toyota will fast-track its effort to provide “appropriate” solutions for different regions. He also added that the new models would cut across luxury vehicles to compact commercial vehicles and focus heavily on China and the United States.
Toyota has abolished a zero emissions vehicle design division called the ZEV factory it previously set up in Japan. The company has replaced it with a BEV Factory that will be dedicated to the production of next-generation battery-powered vehicles. It was revealed that the new factory will consist of three platforms that focus on software, electronics, and vehicle chassis.
Although Toyota has managed to retain its spot as the top-selling automaker in the world, it must deal with rising challenges like safety test problems at its affiliate Daihatsu and increasing pressure from green investors.
Toyota accelerates its EV transformation with a $7 billion investment
To make up lost ground, Toyota is planning additional 1 trillion yen ($7.4 billion) investment through 2030 in its EV unit. This brings the total planned investment within the period to around $37 billion. Toyota projects that it would sell over 3.6 million hybrid vehicles this year.
Longtime Toyota President Akio Toyoda who was replaced in April championed spreading the company’s bet on the future of cars. Sato has largely agreed with his previous boss who believes that the company can make a high margin from hybrid vehicles in the short term and reinvest it into EVs in the long term.
“Toyota will seek to provide optimal solutions at an accelerated pace without wavering from our multi-pathway approach,” Sato said on May 10.
Toyota Executive Vice President Hiroki Nakajima echoed the challenges that other executives in the industry have highlighted concerning turning the EV portfolio to profitability. According to Nakajima, EV margins will continue to be eroded by the high battery costs for some time.
Environment activists accuse Toyota of climate-wrecking policies
Three asset managers with a collective holding of Toyota stock worth $400 million on May 10 submitted a shareholder proposal asking Toyota to improve disclosure of its climate change lobbying. This came after protestors accused the automaker of climate-wrecking policies.
The group of shareholders includes Dutch pension investment company APG Asset Management, Norway’s Storebrand Asset Management, and Danish pension fund AkademikerPension. They are calling on Toyota to commit to a comprehensive annual review of its climate-related lobbying.
“We are concerned that Toyota is missing out on profits from soaring EV sales, jeopardizing its valuable brand and cementing its global laggard status,” said Anders Schelde, chief investment officer at AkademikerPension. “We need concrete policy changes and a better annual review drawing on independent data to calm international investors.”
After the shareholders submitted their proposal, Greenpeace Australia Pacific released a statement saying it would support the move and called on Toyota to apply the brake on efforts to diminish Australia’s fuel efficiency standards which the government is accepting submissions on this month.
“Toyota’s own shareholders share our concerns that the automaker is blocking progress on EVs through its fossil fuel lobbying, despite clear demand from consumers for cleaner, more affordable EV options both at home and abroad,” said Joe Rafalowicz, Greenpeace Australia Pacific campaigner. “We urge all policy-makers to prioritize people and the planet ahead of Toyota’s profit motive.”