Road To Riches

What’s going on?

Toyota spent last quarter in the profit-making fast lane, according to Tuesday’s update.

What does this mean?

While a slowdown in China has got carmakers like Volkswagen and Nissan trimming their sales outlooks, Toyota managed to keep its wheels turning last quarter. And sure, the world’s biggest carmaker still felt the pinch in China – but it made up for it thanks to robust demand in the US and a weaker Japanese yen, boosting the value of its international earnings. In fact, Toyota sold over 2.5 million vehicles globally, an 8% increase from the same time last year. That drove operating profit up by an eye-watering 94% to a record high – hitting 37% of its annual target in just one quarter. Investors were revved up by that news, sending Toyota’s stock to a record high too.

Why should I care?

The bigger picture: Charging into China.

Toyota’s performance in China certainly wasn’t stellar, and the fact is, conquering the world’s biggest car market is crucial for the Japanese giant. See, the rapid shift away from gas guzzlers in China and the rise of local EV brands are serious challenges, given that Toyota’s mainly sold hybrids and gas-powered cars to date. So, to retain its crown as the world’s biggest carmaker, Toyota needs to accelerate its development of EV tech, expand its battery-only lineup, and cut costs to boost its competitiveness in the country too.

Zooming out: A yen for profit. 

Japanese companies have been cruising lately, with favorable currency conversions giving their results a helping hand. But that tailwind might be set to lose its strength: as inflation heats up in Japan, the Bank of Japan could be nudged to join the global fight against rising prices. And that shift could pump up the yen’s strength and turn the tables on Japanese multinationals – a scenario that some analysts are already placing bets on.