The world’s largest carmaker is finally battling a chip shortage that stifled growth across the industry last year. Given Toyota’s shrewd driving so far and a possible partial improvement in the supply-chain this year, this problem probably won’t remain much.
Toyota’s real challenge is how to negotiate the changing landscape of the auto industry: specifically the interests of consumers and governments in an electrified future.
The Japanese carmaker has gotten rid of the pandemic and the resulting supply-chain chaos better than most peers. But as component shortages persist, it’s also caught up with Toyota: The company’s revenue fell 4.5% last quarter from a year earlier.
Toyota on Wednesday lowered its sales forecast by 3.5% for the fiscal year ending March as semiconductor shortages curtailed production. It now expects to produce 8.5 million cars, including its luxury Lexus brand, this fiscal year, down from the 9 million forecast in November. This will still be around 8% higher than the sales in the previous fiscal. Toyota also adjusted its revenue forecast, but kept profit guidance unchanged. This partly reflects a cheaper yen, but also pricing power: cuts in incentives and discounts are more likely to happen in a market where supply remains so tight.
With the pandemic likely in 2022, Toyota could successfully address this problem in the rear view mirror as well. The big question for investors is what direction the company is actually heading. Toyota has been slow to move into battery-powered electric vehicles and has instead relied on traditional hybrids such as the Prius for its electric strategy.
But how to deal with the EV transition has become an inevitable question for every auto maker, especially after last year’s explosive growth. Driven by strong growth in China and Europe, EV sales doubled in 2021. According to the Industry Data Tracker, EVs, including plug-in hybrids, accounted for 17% of car sales in Europe and 13% in China throughout 2021. EV-Vol. The admission rate was even higher in the latter part of the year.
Toyota’s two biggest markets—Japan and the US—are lagging behind in EV adoption. According to EV-Volume, the EV market share in North America is about 4.4%, and even less in Japan. So it makes sense that battery EVs and plug-in hybrids account for about 1% of Toyota’s car sales globally. But increasingly, government policies and market changes can force a company to move faster.
In fact, Toyota revealed its most ambitious EV plan ever in December. The company said it aims to increase sales of battery-powered EVs to 35 million by 2030 and has pledged to invest $70 billion in electrification — half of which is going to such EVs. It will partner with Lexus to introduce 30 new EV models.
Looking to the future, Toyota shareholders will be watching closely to see how and if the company can continue to grow sales and profits based on its mastery of existing platforms — as well as more bold, future technologies. Can also make a big investment.
This story has been published without modification to the text from a wire agency feed
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