Photo: Toyota
Toyota insisted that its current strategy, which favors hybrids over electric vehicles, is the best for the market conditions. Nevertheless, 2022 brings a brutal reality check for the Japanese carmaker, which posted disappointing results for the second quarter that ended on September 30 in Japan.
Toyota gained an eco-image from selling its hybrids like the Prius, but it tarnished it by going against the electrification trend. The Japanese carmaker not only resisted the EV revolution but actively tried to hamper efforts to accelerate EV adoption. As is usually the case, sometimes the market changes direction faster than some players might like to admit. In the case of Toyota, the writing was on the wall for a long time.
The Japanese carmaker continued its downward trend, with the Q2 results showing a significant steam loss. Operating profit fell 25 percent to 562.7 billion yen ($3.89 billion) in the July-September quarter. Toyota’s operating profit margin shrank to 6.1 percent from 9.9 percent in 2021. This erodes one of the key stats where Toyota was considered the industry leader. Now Tesla, with its revolutionary production techniques, is set to lead the charge.
The 25% drop in quarterly profit announced on Tuesday is ground-shaking and prompts Toyota executives to consider raising the prices to retain its profitability. The results are disappointing, marking the fourth consecutive quarterly profit decline. Toyota also cut the annual production target for the 2022 Japanese fiscal year from 9.7 million vehicles to 9.2 million. The automaker blames the results on semiconductor shortages and surging material costs.
But there’s one thing that sticks throughout those missed quarterly targets. Every time, Toyota insists it has the best tools to appease its customers. Two years ago, Toyota boss Akio Toyoda spoke in charades about having the best kitchen and chefs, unlike Tesla, which only has a recipe. Throughout this year, we’ve heard various executives say that electric vehicles are not the right way.
That was even after the surprise announcement of a $38 billion plan to launch 30 new EVs on the market. Since then, the plan was scrapped, and Toyota got back to the drawing board. This happened after its first EV, the bZ4X, was recalled because the wheels would fall off. The new change of plans means that Toyota would face even more delays in addressing the market shift toward electrification.
For the first time, the Japanese carmaker does not consider Tesla a recipe-seller but wants to copy its kitchen and train new cooks to help with the profitability. Toyota is so far ahead in the cost war that Toyota finally noticed. While Toyota’s operating margin dropped to 6.1 percent in the second quarter, Tesla reported an eye-popping 14.95% margin, which is unheard of in the automotive industry.
The Japanese carmaker continued its downward trend, with the Q2 results showing a significant steam loss. Operating profit fell 25 percent to 562.7 billion yen ($3.89 billion) in the July-September quarter. Toyota’s operating profit margin shrank to 6.1 percent from 9.9 percent in 2021. This erodes one of the key stats where Toyota was considered the industry leader. Now Tesla, with its revolutionary production techniques, is set to lead the charge.
The 25% drop in quarterly profit announced on Tuesday is ground-shaking and prompts Toyota executives to consider raising the prices to retain its profitability. The results are disappointing, marking the fourth consecutive quarterly profit decline. Toyota also cut the annual production target for the 2022 Japanese fiscal year from 9.7 million vehicles to 9.2 million. The automaker blames the results on semiconductor shortages and surging material costs.
But there’s one thing that sticks throughout those missed quarterly targets. Every time, Toyota insists it has the best tools to appease its customers. Two years ago, Toyota boss Akio Toyoda spoke in charades about having the best kitchen and chefs, unlike Tesla, which only has a recipe. Throughout this year, we’ve heard various executives say that electric vehicles are not the right way.
That was even after the surprise announcement of a $38 billion plan to launch 30 new EVs on the market. Since then, the plan was scrapped, and Toyota got back to the drawing board. This happened after its first EV, the bZ4X, was recalled because the wheels would fall off. The new change of plans means that Toyota would face even more delays in addressing the market shift toward electrification.
For the first time, the Japanese carmaker does not consider Tesla a recipe-seller but wants to copy its kitchen and train new cooks to help with the profitability. Toyota is so far ahead in the cost war that Toyota finally noticed. While Toyota’s operating margin dropped to 6.1 percent in the second quarter, Tesla reported an eye-popping 14.95% margin, which is unheard of in the automotive industry.
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