On the Dash:
- Toyota’s operating income is forecast to increase 18% to 992 billion yen in the July-September quarter, marking its first year-over-year gain in six quarters.
- Higher-margin electrified vehicle sales in North America rose more than 30% to nearly 430,000 units, supported by demand for fuel-efficient hybrids.
- Declining sales in China and the Middle East remain a challenge as Toyota invests in factory automation, vehicle software and autonomous driving.
Toyota is projected to announce its first increase in operating income in six quarters when it releases its July-September results Thursday, with the median estimate calling for operating profit to rise 18% to 992 billion yen (about $6.3 billion), according to the median estimate of nine analysts surveyed by LSEG. Revenue is also forecast to increase by 8% to 13.4 trillion yen, as several factors are anticipated to support Toyota’s earnings:
- A weaker yen.
- Stronger demand for higher-margin hybrid vehicles.
- The absence of U.S. tariff-related costs that affected earnings a year ago.
Global sales of Toyota and Lexus vehicles fell 4% to just over 2.5 million units during the quarter, yet sales of electrified vehicles in North America jumped more than 30% to nearly 430,000 units even as overall U.S. sales volume rose less than 1%. According to Yuya Takahashi, an Analyst at Marusan Securities, rising gasoline prices are fueling demand for fuel-efficient hybrids.
Additionally, a 22% drop in China and a roughly one-third decline in the Middle East weighed heavily on Toyota’s global sales. Although China remains a key concern for investors because domestic automakers are competing fiercely and consumers are shifting rapidly toward EVs, a transition that challenges Toyota’s gasoline-powered and hybrid-heavy lineup. The slowdown also showed up at supplier Denso, which reported last week that its operating profit in Asia fell more than one-third in the six months through September as weaker vehicle sales in China and higher material costs hit results.
Investors will also watch Toyota’s growing investments in factory automation, vehicle software and autonomous driving. Toyota told investors in September that modernizing its factories could cost about 1 trillion yen (roughly $6.4 billion) a year starting in 2028 across Toyota, its group companies and major suppliers, though the automaker didn’t say whether that spending will definitely occur or how long it will last. The company said the effort could require about 400,000 robots as it steps up automation and robotics at its plants.
