Toyota Motor Corp. reported its first quarterly profit decline in two years, impacted by a temporary production halt in the U.S. and intense competition in China. The automaker's operational profit fell to 1.16 trillion yen, a 20% drop from the previous year, reflecting challenges in its key markets.
Toyota’s Profit Streak Ends as U.S. Production Delays, Chinese Competition Slow Momentum
As declining sales and manufacturing volume halted the world's best-selling carmaker's recent record run, Toyota Motor reported its first quarterly profit decline in two years on November 6.
Up until earlier this year, the Japanese manufacturer had been experiencing record profits. According to Reuters, this was mainly due to its strong emphasis on hybrid models, which let it capitalize on rising consumer demand for less expensive cars rather than the more costly battery-powered electric vehicles in the face of skyrocketing inflation.
However, a now-resolved production suspension of two models in the U.S. and fierce competition from Chinese brands in the largest car market in the world have begun to impede its sales momentum in recent months.
Toyota Sees 20% Profit Decline Amid U.S. Costs and Increased Marketing Efforts in China
For the three months ending in September, Toyota's operational profit was 1.16 trillion yen ($7.55 billion), which was 20% less than the 1.44 trillion yen it made the previous year and primarily consistent with the 1.2 trillion yen profit prediction average of nine analysts polled by LSEG.
The business kept its profit projection at 4.3 trillion yen for the current year.
Higher labor expenses and a decline in sales volume hurt North America's operating profitability, including Toyota's largest U.S. market.
Operating income in China decreased during the first half of the fiscal year, primarily due to increased marketing expenses as the company tried to outbid Chinese brands on price.
Over two-fifths of all automobiles sold worldwide between July and September were hybrids, up from a third at the same time last year.
On November 6, shares of Japan's second-largest manufacturer, Honda Motor, fell 5% after Toyota's smaller local rival revealed a shocking 15% decline in second-quarter operating profit due to a sharp decline in sales in China.
Following the results, Toyota's stock increased 1.0%, trailing a 2.2% increase in the overall market.