Toyota Earnings Preview: Expect Profit Dip Amid Sales Slowdown

Toyota Motor is set to release its third-quarter earnings on Wednesday, projecting a second consecutive quarterly profit decline due to cooling sales growth following a surge fueled by hybrid vehicles.

Despite the expected profit drop, analysts anticipate Toyota to still record over $9 billion in quarterly operating income. This is attributed to its strategic shift towards higher-margin hybrids in the U.S., replacing conventional petrol cars.

However, lower sales and output volumes indicate a slight deceleration for Toyota. Analysts suggest that the quarterly results could be somewhat below expectations despite favorable exchange rates.

According to a survey of nine analysts by LSEG, Toyota is forecast to report a 16% year-on-year decline in operating profit to 1.419 trillion yen ($9.1 billion) for the October-December quarter. This follows a 20% profit drop in the previous quarter, signaling a departure from Toyota's record earnings streak supported by strong hybrid sales and the yen's depreciation against the U.S. dollar.

Toyota previously announced global group unit sales of 10.8 million vehicles in 2024, maintaining its position as the world's top-selling automaker for the fifth consecutive year.

While Toyota's global sales of its namesake and Lexus brands remained relatively unchanged year-over-year in October-December, output declined by 4%. Production has since normalized, and management is likely to provide positive guidance for the final quarter of the fiscal year.

Toyota faces intense competition from Chinese brands, particularly in Europe, South America, Southeast Asia, and China, where electric vehicle demand remains high.

Investors will be closely watching Toyota's outlook for the remainder of the fiscal year, which ends in March. They are eager to learn about its strategy for managing its North American operations after U.S. President Donald Trump imposed tariffs on Mexican and Canadian imports, which were later suspended. Toyota operates auto plants in both countries.

Toyota's future electrification plans will also be a focus, as the company aims to build upon its hybrid car sales, which accounted for 43% of its unit sales in the previous quarter. Toyota's share price has declined by 25% since reaching a peak last March and has fallen 8% so far this year.