Toyota plans big electric vehicle push in China

Toyota’s new chief executive has promised to accelerate its electric vehicle push in China as it forecast a 10 per cent increase in annual operating profit to ¥3tn ($22bn), the highest for a Japanese company.

The world’s largest carmaker signalled it would go back on the offensive, as it aims to sell a record number of vehicles this year on the back of an easing chip crunch.

Koji Sato, who took over as Toyota’s chief earlier this month, is tasked with maintaining its lead in an industry that is rapidly shifting to electric vehicles and navigating geopolitical risks posed by the US-China dispute.

For the fiscal year to March 2024, the group, which also owns the Daihatsu and Isuzu brands, would aim to sell a record 11.4mn units, compared with 10.6mn in the previous year, it said on Wednesday.

Toyota, including its luxury Lexus brand, said annual global sales of battery-powered vehicles would probably rise from 38,000 units last year to 202,000 units, as it addressed its fewer offerings compared with rivals.

During the three months to the end of March, the company’s operating profit rose 35 per cent from a year earlier to ¥626.9bn, while revenue increased 19 per cent to ¥9.7tn.

Shares in the Japanese carmaker rose as much as 2.5 per cent on Wednesday after it unveiled a share buyback plan worth up to ¥150bn.

At a news conference, Yoichi Miyazaki, Toyota’s chief financial officer, said the company was now ready to produce a record number of vehicles this year following various measures it had taken to address the shortage in semiconductor components.

“About a year ago, we had no visibility on which chips would run short at which timing,” Miyazaki said.

“Our efforts are not complete, but our ability to manage chip supplies has significantly improved,” he added.

At the same time, officials also acknowledged the challenges Toyota faced in China, the world’s largest car market.

In recent months, Japanese carmakers have posted the sharpest sales decline in China among foreign brands owing to the slow rollout of battery-powered vehicles. Toyota’s own 2022 vehicle sales in China, where it has roughly a 9 per cent market share, fell for the first time in a decade.

“The shift to battery electric vehicles [BEVs] in China is fast so we will aggressively roll out BEVs,” Sato said. “At the same time, it is true that there is steady demand for hybrid vehicles as well . . . so we will work on both fronts.”

CLSA analyst Christopher Richter said Toyota’s guidance, which was in line with market expectations, appeared conservative but still represented a good start for Sato.

“Outperformance of these numbers will further strengthen his hand,” Richter added. “I was also glad to see that the executives were awed by what they saw at the Shanghai Motor Show, and have a keener appreciation for the competition. They need it.”

Separately on Wednesday, three European asset managers said they had submitted a shareholder proposal seeking better disclosure of Toyota’s climate-related lobbying efforts.

In recent years, Toyota has been targeted by AkademikerPension, a $20bn Danish fund, and other European funds for its opposition to going “all in” on electric vehicles.

The producer of the Prius hybrid has long argued that a dramatic shift to electric vehicles could result in polluting the environment if energy is sourced by fossil fuels, with hybrids providing a greener solution for the transition period. Its board advised shareholders to vote against the shareholder proposal.