Toyota raises profit forecast as hybrid sales soar

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Rising sales of hybrid cars helped Toyota beat estimates in the third quarter as the world’s largest automaker raised full-year profit forecasts and provided further vindication of its bet on the technology.

The Japanese company increased its operating profit forecast for the year to March to ¥4.9tn ($34bn) from ¥4.5tn and said that profit in its fiscal third quarter hit ¥1.7tn, an increase from ¥957bn a year earlier. The results beat analyst expectations, according to LSEG data, and sent its shares up 4.8 per cent by the close in Tokyo.

The carmaker said the increase was mostly owing “to marketing efforts as sales volume increased in all regions”, especially for higher margin and hybrid electric vehicles, while the weak yen provided an additional benefit. 

“In all regions, the share of hybrid sales has gone up, so as a realistic solution hybrids are still favoured by our customers,” Toyota’s chief financial officer Yoichi Miyazaki told journalists.

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“Last year, hybrid vehicles sold 3.4mn to 3.5mn units. In 2022, I think it stood at 2.6mn or so. So within the year, there has been an increase of slightly less than 1mn in demand for hybrids globally. And I think demand is likely to reach 5mn units by around 2025,” he said.

In the third quarter, hybrid sales increased 47 per cent year on year to 951,000, as total vehicle sales rose 10 per cent.

The buoyant sales of hybrid electric vehicles counter concerns from some analysts that Toyota is not moving fast enough towards pure battery-electric vehicles (BEVs). It plans to sell 3.5mn of the EVs annually from 2030 but sold only 104,000 BEVs in the 2023 calendar year.

The increase in hybrid demand “vindicates their bet on the technology. However, the risk is if EV demand picks up quickly, through mass-market production for example, Toyota might not be ready to take advantage. But clearly, Toyota is now in a sweet spot,” said James Hong, auto analyst at Macquarie

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“Many [original equipment manufacturers], such as GM, are making the same kind of bet on hybrids now, as BEV growth declines and CO₂ targets from regulators remain in place,” said Thomas Besson, head of automotive research at Kepler Cheuvreux.

The Toyota group — which retained its crown as the world’s largest carmaker last year, selling a record 11.2mn passenger vehicles when including its subsidiaries — has long been committed to “a multi-pathway approach” that relies on a wide variety of cars being sold across more than 170 countries, where BEVs will remain unaffordable for years to come.

Last month, its chair Akio Toyoda said he saw BEV penetration topping out at 30 per cent and the level of adoption was “something that customers and the market will decide, not regulations ​​or political power”. The remaining 70 per cent of vehicles would be hybrids, hydrogen-powered or have traditional petrol engines, he added. 

Toyota is currently battling a spate of data scandals at some of its closest affiliates, including Daihatsu, which has led to it slightly lowering sales estimates for Japan. 

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Toyoda said last week he would personally “take action” and attend the annual meetings of affiliates this summer where he would be judging them on what actions they had taken. The group would also examine the pace of new projects and development in light of the scandals, some of which were brought about by too much pressure on the affiliates.