Despite facing pressure for automotive industry disruptions and the push towards electric vehicles, Toyota remains steady in its approach. While some institutional investors have raised concerns about Toyota’s gradual approach to eliminating carbon dioxide emissions, Moody’s Ratings has confirmed its A1 rating and upgraded its outlook to positive. This positive outlook is attributed to Toyota’s consistent improvement in its credit profile despite challenges in the automotive sector.
CreditSights, a Fitch solutions company, has advised Toyota to prepare for the electric vehicle market while acknowledging the success of its hybrids. Toyota’s automotive operating margin saw an increase, driven by electrified vehicles, with hybrids accounting for a significant portion of its sales. Despite the success in its financial results, Toyota recognizes the need for heavy investments in electrification in the coming years, leading to a decline in operating profit projected for the current financial year.
Moody’s raised concerns about the competitive landscape, regulatory changes, and governance risks faced by Toyota, but acknowledged the company’s strong sales, profit, and EBITA margin. The report also highlighted Toyota’s strategic shift towards battery electric vehicles, which involves significant capital and research and development expenditures. Despite the expected decrease in margin due to increased costs, Moody’s anticipates Toyota’s EBITA margin to remain high over the next year and a half.
In light of recent scandals and criticisms regarding its board independence, Toyota is gearing up for its annual meeting scheduled for June 18. The meeting will address issues such as government testing rule problems, discontent with the board, and calls for the removal of Chairman Akio Toyoda. In response, Toyota has emphasized the continued role of internal combustion engines, unveiling a new generation of ICE engines designed to work alongside batteries in hybrid vehicles. This approach has received support from investment bank UBS, which sees potential for profit maximization and increased sales shares in the future.
Toyota’s global sales figures for 2023 surpassed its competitors, with Statista reporting that Toyota sold 11.23 million vehicles worldwide, compared to Volkswagen’s 9.24 million in second place. Toyota’s dominance in the global automotive market indicates its strong position despite the challenges and changes facing the industry. As Toyota continues to navigate the transition towards electrification and address governance concerns, its strategic partnerships and focus on innovation are expected to drive its success in the evolving automotive landscape.
