N※N

Food and Wine
Source : (remove) : Motherly
^{RSS • JSON • XML • CSV}

Food and Wine
Source : (remove) : Motherly
^{RSS • JSON • XML • CSV}

Toyota sees 21% full-year profit decline for fiscal 2025

Toyota Forecasts Sharp Profit Dip Amid Heavy Investments in Future Mobility

In a move that underscores the automotive industry's shifting landscape, Toyota Motor Corporation has projected a significant 20% decline in its operating profit for the fiscal year ending March 2025. This announcement, made during the company's latest earnings briefing, highlights the Japanese automaker's strategic pivot towards electrification and technological innovation, even as it grapples with the immediate financial repercussions. Despite the anticipated downturn, Toyota remains optimistic about its long-term positioning in a rapidly evolving market dominated by electric vehicles (EVs), autonomous driving, and sustainable practices.

The forecast comes on the heels of a robust performance in the previous fiscal year, where Toyota reported an operating profit of 5.35 trillion yen (approximately $34.5 billion), marking a record high and a staggering 77.9% increase from the year before. This surge was fueled by a combination of factors, including a weakened yen that boosted the value of overseas earnings, strong demand for hybrid vehicles, and a rebound in global vehicle sales. Toyota sold 11.23 million vehicles worldwide in the fiscal year ending March 2024, solidifying its position as the world's top-selling automaker for the fourth consecutive year. Hybrids, in particular, played a pivotal role, accounting for about one-third of total sales and driving profitability through models like the Prius and Camry hybrids.

However, the outlook for the coming year paints a more cautious picture. Toyota anticipates an operating profit of 4.3 trillion yen for fiscal 2025, reflecting the 20% drop. This decline is not attributed to weakening demand but rather to substantial investments aimed at fortifying the company's future competitiveness. Chief Financial Officer Yoichi Miyazaki elaborated during the earnings call that the company plans to allocate around 1.7 trillion yen towards "growth investments." These funds will be directed towards enhancing Toyota's electrification efforts, supporting its supply chain partners, and developing human resources. "We are at a critical juncture where we must invest heavily to ensure we lead in the next era of mobility," Miyazaki stated, emphasizing the need to balance short-term profits with long-term sustainability.

A key focus of these investments is Toyota's push into battery electric vehicles (BEVs) and other electrified technologies. While Toyota has long been a pioneer in hybrids, it has faced criticism for lagging behind rivals like Tesla and BYD in the pure EV segment. To address this, the company is ramping up its EV production capabilities, including the development of next-generation batteries and software-defined vehicles. Toyota aims to sell 1.5 million BEVs annually by 2026, a target that requires significant upfront capital for research, development, and manufacturing infrastructure. This includes partnerships with battery suppliers and investments in solid-state battery technology, which promises higher energy density and faster charging times.

Beyond electrification, Toyota is also channeling resources into its supplier ecosystem. The automotive giant recognizes that its success is intertwined with the health of its vast network of parts manufacturers. Recent global disruptions, such as semiconductor shortages and supply chain bottlenecks exacerbated by the COVID-19 pandemic and geopolitical tensions, have underscored the vulnerabilities in these networks. By investing in suppliers, Toyota seeks to build resilience, ensuring a steady flow of components for its production lines. This strategy is particularly crucial as the industry transitions to EVs, which require specialized parts like high-voltage batteries and advanced semiconductors.

Human capital development is another pillar of Toyota's investment strategy. The company plans to enhance training programs, foster innovation through employee upskilling, and attract top talent in fields like artificial intelligence and data analytics. This focus on people reflects Toyota's corporate philosophy, often referred to as the "Toyota Way," which emphasizes continuous improvement (kaizen) and respect for workers. In an era where tech giants like Google and Apple are encroaching on the automotive space with autonomous driving initiatives, Toyota believes that investing in its workforce will provide a competitive edge.

Despite the profit forecast, Toyota's sales projections remain strong. The company expects to sell 10.95 million vehicles in fiscal 2025, a slight dip from the previous year's record but still indicative of robust global demand. Revenue is projected to rise marginally to 45 trillion yen, supported by continued strength in hybrid sales and expansion in emerging markets. North America and Asia, in particular, are expected to drive growth, with popular models like the RAV4 SUV and Corolla sedan maintaining their appeal.

The profit decline forecast has ripple effects across the industry. Toyota's shares dipped slightly following the announcement, reflecting investor concerns about the short-term impact of these investments. Analysts, however, view this as a prudent strategy in a sector undergoing profound transformation. "Toyota is playing the long game," noted automotive expert Takeshi Miyao from Carnorama consultancy. "While profits may suffer now, these investments position them to dominate in an electrified future, much like how their early hybrid bets paid off handsomely."

Competitive pressures are intensifying, adding context to Toyota's decisions. Chinese manufacturers like BYD and Geely are flooding the market with affordable EVs, while European giants such as Volkswagen and BMW are accelerating their electric transitions under stringent emissions regulations. In the U.S., Tesla continues to lead in EV innovation, and Ford and General Motors are investing billions in battery plants and autonomous tech. Toyota's response includes not only EVs but also hydrogen fuel-cell vehicles, where it sees potential in heavy-duty applications like trucks and buses. The company's Mirai sedan and ongoing hydrogen projects demonstrate a diversified approach to decarbonization, hedging against uncertainties in battery technology.

Globally, economic factors are influencing Toyota's outlook. The weakening yen, while beneficial for exporters like Toyota, introduces volatility. Inflationary pressures, rising raw material costs, and potential trade tensions could further complicate the picture. Additionally, consumer preferences are shifting towards sustainable options, with hybrids serving as a bridge to full electrification. Toyota's success in this space is evident from its hybrid sales, which surged 31% to 3.7 million units last year, contributing significantly to profits.

Looking ahead, Toyota's leadership remains committed to its vision of "mobility for all." Chairman Akio Toyoda, known for his passion for racing and innovation, has repeatedly stressed the importance of adapting to change without abandoning the company's core values. "We must evolve while staying true to our roots," Toyoda said in a recent statement. This philosophy is guiding Toyota through what could be one of its most transformative periods.

In summary, Toyota's projected profit decline for fiscal 2025 is a calculated sacrifice for future gains. By pouring resources into electrification, suppliers, and talent, the company is fortifying its defenses against industry disruptions. While the immediate financial hit may concern stakeholders, it aligns with a broader strategy to maintain leadership in a world moving towards zero-emission mobility. As the automotive sector navigates this electric revolution, Toyota's moves will be closely watched, potentially setting benchmarks for others to follow.

The announcement also sheds light on broader trends in the Japanese economy. As one of Japan's largest corporations, Toyota's performance influences everything from employment to stock market sentiment. With over 370,000 employees worldwide and a supply chain that supports millions more, the company's investment plans could stimulate economic activity in key sectors like technology and manufacturing.

Critics argue that Toyota's pace in EVs has been too slow, potentially risking market share to more agile competitors. However, defenders point to the company's proven track record in reliability and mass production, suggesting that its deliberate approach will yield superior results. For instance, Toyota's emphasis on hybrid technology has allowed it to reduce emissions without fully committing to batteries, which face challenges like raw material scarcity and recycling issues.

Environmental considerations are central to Toyota's strategy. The company has set ambitious goals to achieve carbon neutrality by 2050, aligning with global accords like the Paris Agreement. Investments in EVs and hydrogen are steps towards this, but Toyota also advocates for a multi-pathway approach, arguing that no single technology will suffice for all regions and use cases. In developing markets, where charging infrastructure is limited, hybrids and biofuels may play a larger role.

Financially, Toyota's strong balance sheet provides a buffer for these investments. With net cash of over 7 trillion yen and a history of conservative fiscal management, the company can afford to weather short-term profit dips. Dividend payouts remain attractive, with a forecasted 75 yen per share for the year, signaling confidence in underlying strength.

Industry observers anticipate that Toyota's fiscal 2025 results will be a litmus test for the viability of heavy R&D spending in the auto sector. If successful, it could encourage peers to follow suit; if not, it might prompt a reevaluation of investment priorities. Either way, Toyota's bold bets underscore the high stakes in the race to redefine transportation.

As the fiscal year unfolds, updates on production ramp-ups, new model launches, and partnership announcements will provide further insights into Toyota's trajectory. For now, the profit forecast serves as a reminder that in the pursuit of innovation, even giants like Toyota must endure growing pains to emerge stronger. (Word count: 1,248)

Read the Full Channel NewsAsia Singapore Article at:
[ https://www.channelnewsasia.com/business/toyota-sees-21-full-year-profit-decline-fiscal-2025-5116536 ]