Toyota Motor (7203.T) delivered a remarkable performance in the second quarter, more than doubling its profit and significantly upgrading its full-year outlook.
This surge in profitability can be attributed to the weaker yen currency, which magnified the positive impact of robust global sales.
During the three months ending in September, the world’s leading automaker achieved a record operating profit of 1.44 trillion yen ($9.5 billion), marking a staggering 155.6% increase compared to the same period the previous year.
Toyota experienced increased sales in all global regions, including the United States, Asia, and its home market, throughout the first half of the fiscal year ending in September.
This growth underscores the company’s widespread success and strong global presence.
Toyota’s strategic shift towards electric vehicles (EVs) has also begun to bear fruit. In June, the company unveiled a comprehensive overhaul of its EV strategy, pledging to enhance driving range and reduce EV costs.
This strategy is now garnering market optimism and renewed interest in Toyota’s gasoline-electric hybrids, especially in the face of higher financing costs affecting EVs in the United States.
While battery EVs are on the rise in China, Toyota faces a stiff challenge in this market due to the competition from domestic EV manufacturers, impacting companies like Nissan Motor (7201.T) and Honda Motor (7267.T).
China, the world’s largest auto market, is witnessing intense price competition, primarily centered around battery EVs.
Toyota’s Southeast Asian markets, particularly Thailand, are also encountering increased competition from rising Chinese investments driven by surging demand for EVs.
Toyota’s strong quarterly results are expected to fuel its growth plans.
The company announced plans to invest an additional $8 billion in a North Carolina plant, where it will manufacture batteries for hybrids, plug-in hybrids, and fully electric vehicles.
As a result of these positive developments, Toyota has raised its full-year profit forecast to 4.5 trillion yen, up from 3 trillion yen, with a significant portion of this increase attributed to favorable foreign exchange rates. This new projection exceeds analysts’ average forecast of 4.0 trillion yen.
The yen’s depreciation, reaching a one-year low of 151.74 per dollar before stabilizing, also played a role in Toyota’s improved outlook.
Toyota assumed an average exchange rate of 141 yen per dollar for the 2023/24 financial year, compared to the previous estimate of 125 yen.
Additionally, Toyota announced a 100 billion yen share buyback, resulting in a 4.7% increase in Toyota shares and contributing to a 2.4% rise in Japan’s benchmark Nikkei index (.N225) on the day the results were released.