Toyota is targeting a 10% profit jump and strong electric vehicle sales as chip problems subside

TOKYO (Reuters) – Toyota Motor Corp. (7203.T) said on Wednesday it expects operating profit to rise 10% in this year of the business, with a fivefold jump in sales of pure electric vehicles amid a global downturn. Supply chain disruption due to chip shortage.

The growth plan was unveiled by new CEO Koji Sato, installed last month, and signals a more aggressive push toward electrification by the Japanese company that previously took a slow approach to all-electric vehicles, arguing that its strategy would provide more consumer choice.

The world’s largest automaker in terms of projected battery EV sales, including those of its luxury brand Lexus, will reach 202,000 worldwide during this year of operation through March 2024 — a more than fivefold increase from 38 000 units last year.

Toyota expected operating profit to rise to 3.0 trillion yen ($22.2 billion) this business year, in line with analysts’ average forecast of 3.02 trillion yen.

The target came after operating profit for the fourth quarter of the fiscal year through March jumped by more than a third to 626.9 billion yen — easily outpacing the average profit of 553.46 billion yen estimated by 10 analysts, according to Refinitiv data.

Toyota’s strategy has seen it come under pressure in China, the world’s largest auto market, where smart domestic brands such as BYD Co Ltd (002594.SZ) have moved aggressively with battery EVs, weakening the dominance of established foreign brands.

But Sato said the demand for battery-powered cars in China largely represented a new need in the market and was separate from the demand for hybrid vehicles.

“We would like to work on both sides,” he said.

The profit target was supported by a weaker yen that boosted the value of overseas sales, and higher production volumes which outweighed the impact of higher material costs. Reflecting the impact of a weaker yen, revenue for the business year that ended in March this year grew to a record high of 37.15 trillion yen.

Shares of Toyota, which had been nearly flat before the earnings release, rose immediately after it was published and rose 2.5% before paring gains to close at 0.8%.

EV acceleration

The new electric vehicle sales target, still a fraction of industry leader Tesla (TSLA.O), would boost Toyota battery electric vehicles to nearly 2% of total sales volume, up from just 0.4% of total sales. Vehicle sales in the last fiscal year.

“We expect an increase in (total) sales volume across all regions and a production volume of 10.1 million (vehicles), due to factors such as … improved semiconductor supply,” Toyota said in a statement. This represents production growth of 11% compared to the previous year.

Seeking to up its game in the electric vehicle segment, where it has been overtaken by new Chinese automakers as well as Tesla, Toyota said it would introduce 10 new battery-powered cars, targeting sales of 1.5 million electric vehicles annually by 2026.

Sato said Toyota will speed up its endeavors to provide “suitable” solutions for different regions, adding that the new models will range from compact commercial vehicles to luxury cars and will mainly focus on the United States and China.

He said the previously announced dedicated unit to focus on next-generation battery EVs, known as the BEV Factory, will consist of three platforms focused on bodywork, electronics and software.

The company decided to scrap its zero-emissions vehicle design division, known as the ZEV Factory, which had been set up in Japan.

Although Toyota has successfully maintained its title as the world’s best-selling automaker, it faces a host of challenges including safety testing problems at subsidiary Daihatsu and growing pressure from green investors.

($1 = 135.0500 yen)

(Reporting by Daniel Lusink) Editing by Kenneth Maxwell

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