Toyota's Profit Expected to Decline for the First Time Since Q2 2022

When Toyota Motor reports its second-quarter earnings on Wednesday, it is expected to record its first profit decline in the last two years, highlighting a cooling demand following strong earnings and the impact of consumers moving away from electric vehicles.

Still, the world's largest automaker is anticipated to report an $8 billion quarterly operating profit, benefiting from drivers in some major markets preferring gasoline-electric hybrids, which have higher profit margins than standard gasoline vehicles.

However, recent sales and production figures suggest a modest slowdown for Toyota. Facing a suspension of deliveries for two models in the United States, Toyota is, like its global competitors, contending with fierce competition in China, the world's largest automotive market, where demand for electric vehicles has not diminished.

Analysts expect Toyota to report an operating profit of 1.2 trillion yen for the July-September period, reflecting a 14% decline year-on-year. This would mark the company's first profit drop since the same quarter in 2022. Toyota's strategy to expand its hybrid lineup in the U.S. may insulate it from potential reductions in electric vehicle subsidies in Washington or similar policy shifts, depending on the results of this week's U.S. presidential elections.

According to company data, hybrids accounted for 41% of Toyota's global sales for the months of July to September, or 1.1 million vehicles, including the luxury Lexus brand, compared to 33% during the same period last year. When announcing its earnings for the April-June quarter, Toyota did not change its full-year profit forecast and projected a 20% decline compared to the previous fiscal year due to expected investments in both its strategy and suppliers.