automobile news

Toyota hopeful for Q3 profit amid high costs of parts and materials

Toyota hopeful for Q3 profit amid high costs of parts and materials
Toyota hopeful for Q3 profit amid high costs of parts and materials

Japanese carmaker, Toyota Motor Corp, is reportedly expecting to post a small profit for the third quarter (Q3) of this year, despite rising costs of materials and parts having nearly neutralized the benefits of a weakening yen and a rebound in production.

The automaker, the largest globally in terms of sales, stated that its global production recovered by 30% in Q3, but cautioned that the shortage in semiconductors and other parts will continue affecting output in the coming months.

While a gradual improvement in the chip shortage will help increase output in the second half of the current financial year, investors will focus more on demand outlook and other possible supply chain disruptions, as well as Toyota’s EV strategy during the automaker’s earnings report.

Earlier this month, the company warned that it may not meet its vehicle production target for this fiscal year due to chip shortage.

It is expected to post a 3% hike on-quarter in its operating profit for Q3 to ¥772.22 billion ($5.19 billion), the highest since the December quarter last year, as per data from Refinitiv.

This will be the first profit surge for Toyota in the past three quarters, marking a major improvement from the expected sharp 42% drop in the previous quarter’s profit, partly due to the falling yen.

Toyota’s overseas sales were boosted this year as the yen dipped nearly 30% against the dollar.

However, the benefits of the low yen were offset by surging input costs, with Toyota having estimated its material cost for the whole year to be ¥1.7 trillion, a 17% surge, back in August.

Toyota and its Japanese competitors Honda Motor and Nissan Motor have been struggling with long-term challenges, including their sluggish move toward electric vehicles.

It was reported recently that Toyota, already a year into its $38 billion EV strategy, is contemplating to reboot it to better compete in the market, which is growing beyond the carmaker’s expectations.

The carmaker had to recall its all-electric vehicle just two months after it went into mass-production in May due to safety concerns, and just began taking leasing orders again in October.

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