Key points:

  • The company’s shares are unstable despite positive financial results.
  • The company is actively developing the hybrid car segment, which brings it significant profits.
  • Sales in China are declining, which negatively affects overall performance.

Japan’s Toyota Motor is expected to post double-digit growth in its quarterly report on Thursday, thanks to robust demand for hybrid vehicles. However, analysts are forecasting a slight slowdown after a series of record profits.

Experts will be focused on assessing the extent to which the global automaker’s growth has slowed compared with previous quarters, due to difficulties in the Chinese market and the fallout from a scandal over the company’s product certification.

Slowing sales growth

The sales data released today point to a likely slowdown in Toyota Motor’s growth. Despite the fact that in April-June of this year, there was increased demand for the company’s automobile products in the United States and Europe, global sales fell by 2% compared to the same period last year. The reason for this decline was weakening demand in the domestic market of Japan and China.

Despite these difficulties, Toyota Motor’s operating profit for the second quarter of the current fiscal year is expected to grow by 20% to 1.3 trillion yen ($8.5 billion). However, it should be noted that this will be the slowest rate of profit growth for the company since the third quarter of 2022. This forecast is explained by the upcoming significant investments aimed at implementing the company’s strategic plans and supporting suppliers.

Toyota Motor was able to benefit from the slowdown in global demand for electric vehicles. With the decline in popularity of electric vehicles, the company increased sales of hybrid cars, which traditionally bring higher profits compared to cars with gasoline engines.

The company’s limited inventory of cars in the US is also helping to stabilise its financial performance. According to James Hong, head of mobility research at Macquarie, the limited inventory reduces the need for stimulus measures aimed at boosting consumer demand.

Investing in hybrid cars

Toyota Motor Company reported a significant increase in hybrid vehicle sales in the first half of this year. Hybrid models accounted for 39% of the company’s total global sales, equivalent to 1.9 million vehicles sold, including the luxury brand Lexus. This result demonstrates the effectiveness of the company’s strategy aimed at increasing the share of hybrid vehicles in the global market.

Focusing on hybrid technologies in the United States, especially in the short term, allows the company to reduce the risks associated with possible changes in government policy regarding electric vehicles. This approach provides Toyota Motor with greater flexibility and resilience in a dynamically changing automotive market.

Despite the positive financial results, the company’s stock prices have shown some volatility in recent months. Although Toyota shares have risen by 13% since the beginning of the year, over the past few months their value has fallen by 25% from the maximum values ​​reached at the end of March. Nevertheless, in dollar terms, the company’s capitalization has increased by 6%, which is significantly higher than its competitors.

Toyota’s strong financial results and rising share price refute criticism of Chairman Akio Toyoda over certification violations at Toyota Group companies. In a recent interview, the founder’s grandson expressed concern about declining shareholder support and suggested that he may not be re-elected as chairman if the trend continues.

Despite its leading position in the hybrid vehicle market, Toyota Motor lags behind its competitors in the electric vehicle segment. The share of electric vehicles in the company’s total sales is only 1.5%, which is significantly lower than the figures of companies such as Tesla, as well as European and Chinese automakers.

The company’s geographic sales structure also shows unevenness. In the first half of 2024, Toyota’s sales in China decreased by 11% to 785 thousand vehicles, while the US market recorded an increase of 14% to 1.2 million vehicles.