Toyota’s Profit Drops by 28%, But Strong Net Income and New EV Plans Signal Future Growth
Toyota Motor, the world’s largest automaker by sales volume, posted a nearly 28% year-on-year drop in third-quarter operating profit. While this marks a significant decline in its profits, the Japanese automaker also revealed some major moves that could help steer it toward a more promising future, particularly in the electric vehicle (EV) market.
Here’s a breakdown of Toyota’s latest financial results, what the future holds for the company, and what investors and car enthusiasts can expect in the coming months.
Third-Quarter Profit Decline: A Mixed Bag for Toyota
For the quarter ending December, Toyota reported a 28% drop in its operating profit, which came in at 1.22 trillion yen. This is a significant dip compared to the same period last year when the company posted an operating profit of 1.69 trillion yen.
Despite this drop, net income attributable to Toyota saw a substantial jump. It climbed to 2.19 trillion yen from 1.37 trillion yen last year. This rise in net income was largely driven by strong sales in certain regions and the company’s ability to manage costs despite the challenging global market conditions.
Here’s how Toyota’s performance stacked up against analyst expectations:
- Revenue: 12.39 trillion yen (vs. 12.1 trillion yen estimated)
- Operating profit: 1.22 trillion yen (vs. 1.39 trillion yen estimated)
- Net income: 2.19 trillion yen (compared to 1.37 trillion yen in the same quarter last year)
Challenges: Declining Car Sales and Regional Setbacks
The decrease in operating profit was partly due to a drop in vehicle sales, especially in Toyota’s key North American and Asian markets. The company’s vehicle sales for the quarter fell to 2.44 million units, compared to 2.55 million units during the same period in 2023.
In particular, Toyota faced a 113.7 billion yen decline in North America and a 46 billion yen drop in Asia in terms of operating profit. These setbacks were compounded by rising material costs, supply chain issues, and the ongoing shift in the global automotive industry towards electric vehicles (EVs).
The Bright Spot: A Strong Net Income and Rising Dividends
While the operating profit fell, Toyota’s net income surged, offering a much-needed positive note. This increase in net income demonstrates Toyota’s ability to maintain profitability despite global economic uncertainties. The company also announced a 7% increase in its dividend for the year, raising it to 90 yen per share, up from 75 yen the previous year.
Despite the challenges, Toyota seems confident about its future, as evidenced by its raised full-year operating income forecast. Toyota now expects to hit 4.7 trillion yen in operating income by the end of its financial year, up by 400 billion yen from earlier projections.
Toyota’s Electric Vehicle Push: A New Company in China
One of the most exciting developments for Toyota is its major push into the electric vehicle (EV) market. Toyota has been slower than some of its competitors to fully embrace battery-powered EVs, focusing more on hybrids and fuel-cell vehicles. However, the company is now making a more aggressive move to catch up with global EV leaders like Tesla and Volkswagen.
In a bid to increase its presence in the EV market, Toyota announced that it will establish a wholly-owned company in Shanghai, China. This new venture will be dedicated to the development and production of Lexus BEVs (battery-electric vehicles) and batteries. The company plans to begin production at this facility by 2027.
This move comes as part of Toyota’s broader strategy to position its luxury brand, Lexus, as a major player in the growing EV market. As the world increasingly shifts toward clean, zero-emissions transportation, this new focus on electric cars could help Toyota secure a significant share of the booming global EV market.
A Competitive Shift in the Global Auto Market
While Toyota has long been the global leader in car sales, the automotive industry is undergoing a massive transformation, particularly with the shift toward electric vehicles. Toyota’s reliance on hybrids has made it a slower adopter of fully electric vehicles, which has raised concerns among investors and analysts.
The move to electric vehicles comes at a critical time, as more and more automakers are ramping up their own EV production to meet government mandates for carbon neutrality and tap into the growing consumer demand for electric alternatives. Toyota’s strategy to produce Lexus BEVs in China signals that the company is serious about gaining ground in the electric vehicle race, particularly in the world’s largest car market.
Looking Forward: A Bumpy Road Ahead for Toyota
Despite these positive steps, Toyota still faces several challenges:
- Global EV Competition: As the EV market heats up, Toyota will need to compete with established players like Tesla, Volkswagen, and BYD. To stay competitive, the company will need to ramp up innovation and ensure its EV models can stand out.
- Supply Chain Issues: Like many other automakers, Toyota is still dealing with global supply chain disruptions, especially in relation to semiconductors and battery materials.
- Shift to EVs: Transitioning its production to fully electric vehicles will require significant investment in new technologies, manufacturing processes, and infrastructure, particularly as it looks to scale up production of Lexus BEVs.
- Regional Challenges: Toyota will need to address the challenges in key markets like North America and Asia. Declining sales in these regions suggest that Toyota may need to adapt its product offerings to better meet the needs and preferences of consumers.
Conclusion: Toyota’s Path Forward
While Toyota’s third-quarter profit took a hit, the company’s strong net income, dividend increase, and aggressive moves into the electric vehicle market demonstrate its ability to adapt and plan for future growth.
By pushing forward with the development of Lexus BEVs and battery production in China, Toyota is positioning itself to become a more competitive force in the rapidly growing EV sector. With production starting in 2027, Toyota hopes to gain ground on rivals and secure its place in the future of mobility.
Investors will be watching closely to see if Toyota can maintain its momentum and overcome the challenges ahead. But with its financial stability and aggressive plans for EV expansion, the company has the resources to stay relevant in an increasingly electrified world.

I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.