Toyota earns 5 trillion yen but predicts profit will shrink by 20% this year due to increased investment in electric vehicles and AI

Japanese automobile giant Toyota announced its impressive quarterly financial results on Wednesday. The performance in the fourth quarter of fiscal year 2023 ended in March was better than expected, and the full-year profit and revenue reached a record high, with full-year profit of 5.35 trillion days. It is the first time that a Japanese company has exceeded 5 trillion yen. However, revenue in the 2024 fiscal year ending in March 2025 is expected to decline by 20% to 4.3 trillion yen, mainly because in order to strengthen technological innovation and maintain market competitiveness, the car manufacturer Actively invest in transformation.

Japanese automobile giant Toyota announced its eye-catching quarterly financial results on Wednesday. The performance in the fourth quarter of fiscal year 2023 ended in March was better than expected, and the full-year profit and revenue hit a record high. The full-year profit was 5.35 trillion yen for the first time. Japanese companies have exceeded 5 trillion yen, but revenue in fiscal year 2024 ending in March 2025 is expected to decline by 20% to 4.3 trillion yen, mainly because the automaker is actively investing in transformation to strengthen technological innovation and maintain market competitiveness.
\”Nikkei Shimbun\” reported that Toyota\’s 2023 annual operating profit margin of 11.9% is higher than Tesla\’s 8.2% and Volkswagen\’s 7%. The increase in profitability will provide funds to accelerate investment. Equipment investment in the new fiscal year will be higher than the previous year. The fiscal year\’s R&D expenses increased by 7% and by 8%, both hitting record highs.
According to Toyota\’s investment guideline for fiscal 2024 proposed on Wednesday, it will invest 1.7 trillion yen in growth areas such as electric vehicles and AI, an increase of 40%.
Toyota President and CEO Tsuneharu Sato said Toyota will consciously invest the funds and time needed to consolidate the foundation. It is expected that equipment investment will increase by 7% from the previous fiscal year to 2.15 trillion yen, and R&D expenses will increase by 8% annually to 1.3 trillion yen. Yuan Qi set a record high in history.
The automaker mentioned technologies that control cars through software such as autonomous driving using AI, and will strengthen its business using batteries and hydrogen energy to develop next-generation engines that are conducive to decarbonization.
The report pointed out that the background of Toyota\’s increased investment is its sense of crisis over the rapid changes in the automobile industry. Competition in the automobile market is focused on software and electrification.
Tesla in the United States plans to invest US$10 billion this year to develop AI technology for autonomous driving and other fields, and will release driverless taxis in August; in China, Xiaomi and other emerging electric vehicle manufacturers that have crossed over from the communications field are using software as a weapon in \”automotive intelligence\” Price competition is also becoming increasingly fierce as we launch an offensive on chemical products.
In terms of equipment investment, Toyota is investing about 2 trillion yen in the United States to produce batteries. Last month, it also said that it would invest 210 billion yen in its second factory in the United States to produce electric vehicles.
In addition to successively launching new electric vehicles in China, it also jointly develops software with Tencent to improve competitiveness.
Toyota had set a target of selling 3.5 million electric vehicles by 2030 but only sold 100,000 last year, accounting for about 1% of total sales. But Toyota is trying to save the situation by improving profitability.
After exceeding 2 trillion yen in fiscal year 2006 (as of March 2007), Toyota\’s operating profit has been unable to reach 3 trillion yen, but it quickly exceeded 5 trillion yen in fiscal year 2023. The market value is also close to 60 trillion yen, and Tesla The gap is closing.
Although the growth rate of electric vehicles in the European and American markets is currently slowing down, the mid- to long-term growth prospects remain unchanged. Wall Street investment bank Goldman Sachs predicts that electric vehicles will account for 34% of global sales in 2030.
The increase in research and development expenses and equipment investment may become the main reason for lowering Toyota\’s profit in fiscal 2024 in the short term, which is expected to decrease by 320 billion yen.
However, Chinese car companies have launched an electric vehicle offensive in Southeast Asia, where Toyota earns 16% of operating profits. If they do not respond early, they may lose the local market. Tsuneji Sato therefore proposed on Wednesday a policy of using profitability to accelerate the pace of investment.

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