Toyota Sticks to Profit Projections Amid Decline and Challenges in China

Toyota has opted to maintain its financial forecasts for the fiscal year 2024/25 despite a significant 55% drop in net profit for Q2, attributed to declining sales in China and Japan, as well as the strong yen affecting export earnings. Revenues remained stable but below expectations, with challenges in new car sales, particularly in Japan due to recalls. The company has lowered its sales volume target while still predicting a net profit decrease of 28% for the full fiscal year.

Toyota Maintains Financial Outlook Amid Profit Decline

Toyota, the leading car manufacturer globally, has decided to keep its financial projections for the fiscal year 2024/25 intact, even in light of a significant drop in net profit during the second quarter. This downturn comes as the company faces falling sales in key markets like China and Japan. From July to September, Toyota’s net profit decreased by a staggering 55% year-on-year, amounting to 573.8 billion yen (€3.5 billion). For the first half of the fiscal year, profits dipped by 26%, falling short of market expectations, which had anticipated a quarterly net profit of 994 billion yen, according to analysts from Bloomberg.

The company attributes this profit decline to the yen’s strong appreciation, which has negatively impacted its export earnings. Additionally, Toyota’s operating profit fell by 20%, exceeding expectations once again.

Sales Challenges and Production Adjustments

In the second quarter, Toyota reported revenues of approximately 11.444 trillion yen, which remained relatively stable year-on-year but still missed forecasts of 11.480 trillion yen. Like many automotive manufacturers worldwide, Toyota is grappling with a slowdown in new car sales. Notably, sales in Japan plummeted by nearly 17% in unit numbers from January to September, primarily due to recalls of the hybrid Prius model. Furthermore, Japanese regulatory authorities have instructed Toyota and several competitors, including Honda, Mazda, Suzuki, and Yamaha, to halt deliveries of specific vehicles in the domestic market due to certification test irregularities.

Despite these challenges, Toyota emphasizes that vehicle quality is not compromised, with internal testing reportedly adhering to stricter standards than those mandated officially. During this period, the company’s sales in China, a vital market, fell by 18% amid intense competition from local manufacturers like BYD, known for its electric vehicles.

Consequently, Toyota has revised its sales volume expectations for the 2024/25 fiscal year downward, now estimating 10.85 million vehicles sold, a decrease from the previously anticipated 10.95 million and down from 11.09 million in 2023/24. Nevertheless, the company remains steadfast in its overall financial forecasts, predicting a net profit decrease of 28% year-on-year to 3.57 trillion yen, an operating profit decline of 19.7%, and a revenue increase of 2% for the full fiscal year ending in March 2025. Toyota is optimistic about a resurgence in global production, particularly with the recent reopening of a manufacturing plant in the United States after an extended partial closure.

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