Toyota posts first quarterly profit drop in two years on US, China woes

2:20 am Wednesday, November 06th, 2024

By Daniel Leussink

TOKYO (Reuters) -Toyota Motor posted on Wednesday its first quarterly profit drop in two years, as slowing sales and production volume stalled the world’s top-selling automaker’s recent record run.

The Japanese automaker had been on a record profit run until earlier this year, with its heavy focus on hybrid models helping it benefit from growing consumer interest in more affordable vehicles than the costlier battery-powered electric vehicles amid soaring inflation.

But heavy competition from Chinese brands in the world’s biggest auto market, and a now-resolved production suspension of two models in the U.S. have started slowing its sales momentum in recent months.

Toyota’s operating profit for the three months to end-September was 1.16 trillion yen ($7.55 billion), down 20% from 1.44 trillion yen a year earlier and largely in line with the 1.2 trillion yen profit estimate average of nine analysts surveyed by LSEG.

The company maintained its profit forecast for the current year at 4.3 trillion yen.

Operating income in North America, which includes Toyota’s top U.S. market, was hit by a deterioration in its sales volume and higher labour costs.

Operating income in China fell during the first half of the financial year mainly due to higher marketing costs as the company seeks to overcome heavy price competition against Chinese brands.

Hybrids accounted for more than two-fifths of the total global sales of Toyota and Lexus brand cars in July-September compared to a third in the same period last year.

Earlier on Wednesday, Toyota’s smaller domestic rival Honda Motor reported a surprise 15% drop in second-quarter operating profit due to a heavy sales drop in China, sending shares in Japan’s second-largest automaker down 5%.

Shares in Toyota rose 1.0% after the results, lagging a 2.2% rise in the broader market.

($1 = 153.6400 yen)

(Reporting by Daniel Leussink; Editing by David Dolan and Muralikumar Anantharaman)