Toyota Sees Profit Jump as Chip Shortage Eases

Toyota Sees Profit Jump as Chip Shortage Eases

Toyota Sees Profit Jump as Chip Shortage Eases

Japan’s multinational automotive manufacturer, Toyota, announced excellent sales in every region for the first three-quarters of FY2024. As the worldwide semiconductor shortage lessens, the company increased its prediction for annual net profit to a record high on Tuesday.

The automaker, which had previously predicted to register a net profit of 3.95 trillion yen ($30 billion) this fiscal year, is now projecting a profit of 4.5 trillion yen, thanks in part to the weakening yen.

During the third quarter, the auto giant also stated that its net profit increased by 86% year-over-year to around 1.36 trillion yen.

Toyota’s revised profit forecast

Toyota automobiles are in high demand, and the company has made a substantial recovery from the supply and semiconductor shortages that have crippled the auto industry in recent years.

The automobile giant has managed to maintain its position as the best-selling automaker in the world last week when it revealed record vehicle sales of 11.2 million across all of its brands in 2023.

However, revelations about manipulated engine and safety tests at its subsidiaries are also a problem, and analysts warned that these would affect the company’s performance as a whole.

Toyota stated that between April and December 2023, all of its sales volumes increased everywhere. According to them, the company’s profit structure also increased as marketing and cost-cutting initiatives countered skyrocketing material prices following the COVID-19 outbreak.

How has the chip shortage affected Toyota?

In September 2021, Toyota slashed its worldwide vehicle production by 40% because of the global chip shortage. This has impacted its production capacity, including for many other automakers around the world. It also cut its annual production target by 500,000 vehicles to 8.5 million. The chip shortage, which began in 2020 and continued into 2021, was primarily caused by disruptions in supply chains due to the COVID-19 pandemic and increased demand for electronic devices.

Semiconductor chips are used by automakers in a variety of car components, such as engine control units, infotainment systems, safety measures, and more. Automakers may find it challenging to sustain their typical production levels when chip supplies are limited.

Further, Toyota’s Chief Financial Officer stated that the chip shortage had caused vehicle orders to “pile up” in early 2023.

Toyota’s EV strategy for the future

With its wildly successful Prius model, Toyota introduced hybrid cars to the world. However, some claim that despite the rising demand for low-emission cars, the corporation has been sluggish to adopt battery-powered engines.

According to official figures released last week, China surpassed Japan to become the world’s largest vehicle exporter in 2023. This move was fueled by China’s supremacy in the electric car market.

Japanese automakers are currently catching up, with Toyota intending to sell 1.5 million EVs a year by 2026 and 3.5 million by 2030.

The company also hopes to mass-produce solid-state batteries that will increase the range of electric vehicles and charge more quickly than conventional ones. Nevertheless, Tatsuo Yoshida, a Bloomberg Intelligence auto expert, told new sources ahead of the results that Toyota is not going to give up on hybrids.

Toyota’s response to idle rumors and the road ahead

Prior to the announcement of the results, he stated that “limited range, charging infrastructure, resale values, and battery recycling” are among the difficulties battery-powered engines confront in addition to their high costs.

Yoshida claims that pent-up demand, a weaker currency, and an improvement in supply chain issues are all helping Toyota.

Yet “scandals involving subsidiaries like Daihatsu and Hino, as well as Toyota Industries, could potentially affect Toyota’s overall performance”, he stated.

Board chairman Akio Toyoda apologized for the scandals and promised to supervise changes to win back customer faith.

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