Toyota projects 10% profit growth and five-fold increase in EV sales this year

Toyota Motor Corp revealed on Wednesday that a 10% increase in operating profit is expected during this business year, as sales of pure electric vehicles (EV) are predicted to surge five-fold with a reduction in global supply chain disruption caused by the ongoing chip shortage.

The ambitious growth plan was introduced by the newly appointed CEO, Koji Sato, who entered the role last month. Sato’s plans indicate a more assertive approach to electrification by the Japanese company, which had previously favored a slower move towards all-electric vehicles, arguing that its strategy allowed for more consumer choice.

Toyota, the world’s largest automaker in terms of sales, projects that battery EV sales (including its luxury Lexus brand) will reach 202,000 units worldwide during this business year through to March 2024. This represents a more than fivefold increase compared to last year’s 38,000 units.

The company anticipates an operating profit of ¥3.0 trillion (US$22.2 billion) for the current business year, in line with the average analyst forecast of ¥3.02 trillion. After experiencing a more than one-third increase to ¥626.9 billion during the fiscal fourth quarter through March, Toyota’s operating profit sits comfortably above the average ¥553.46 billion estimated by ten analysts, based on Refinitiv data.

Despite Toyota’s strategy, it has faced challenges in the Chinese market, the largest automobile market worldwide. Chinese companies such as BYD Co Ltd have aggressively pursued battery EVs, impacting the dominance of established foreign brands. However, Sato stated that the demand for purely battery-powered vehicles in China is mainly driven by new market needs and is separate from the demand for hybrid vehicles.

Toyota’s profit target has been supported by a weakened yen, which increases the value of overseas sales, and increased production volumes that counterbalance the effects of rising material costs. As a result of the weak yen, revenue for the business year ending March grew to a record ¥37.15 trillion.

Upon the release of Toyota’s earnings, the company’s shares quickly surged, increasing by as much as 2.5% before settling with a 0.8% gain.

The new EV sales target, although still lagging behind industry leader Tesla, would raise Toyota’s battery EV sales to approximately 2% of their total sales volume, compared to just 0.4% in the last fiscal year.

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

In an effort to position itself as a bigger player in the EV sector, where it has been outperformed by new Chinese automakers and Tesla, Toyota stated that it will introduce ten new battery-powered vehicles with the aim of selling 1.5 million EVs per year by 2026.

Sato mentions that Toyota is accelerating its efforts to offer “appropriate” solutions for varied regions, emphasizing that new models will primarily target the United States and China, with vehicle types ranging from compact commercial to luxury.

Furthermore, Sato announced that a previously disclosed dedicated unit, focused on next-generation battery EVs and referred to as the BEV Factory, would be divided into three platforms dedicated to vehicle chassis, electronics, and software, reports Bangkok Post.

The company has also chosen to dissolve its zero-emissions vehicle design division, known as the ZEV factory, which had been established in Japan.

Although Toyota has maintained its status as the world’s top-selling automaker, the company must overcome various challenges, including safety test issues at its affiliate, Daihatsu, and growing pressure from green investors.