Toyota got it right. The future may be mostly electric, but the present is increasingly hybrid and Toyota is the hybrid brand for much of the world. This means Toyota is making money. A ton of money. So much money.
Years of work went into this moment, and Toyota was perfectly positioned to take advantage of the weird post-pandemic world we’re all trying to survive. But that’s not going to work forever. If you want things to stay the same (in this case, if you want to keep printing money) you’ve got to be willing to change. What’s Toyota’s next act going to be?
Wholesale used car prices are down a bunch as automakers have new cars to sell, which is nice. New cars! What a time to be alive.
This is weirdly kinda bad for some automakers as they experienced a period where they could charge silly money for cars coming off lease. BMW is one of those automakers and its financials were a little meh because of it.
And, finally, they’re all doing better than Rivian, who is losing $38k per car.
Toyota Made 5 Trillion Yen Last Year
Toyota, like many Japanese companies, is on a financial calendar that ends in the first quarter of the year. This means that Toyota’s fiscal year is over and the company can report how much it made. It made a lot. Specifically, the company made 5.35 trillion yen in profit, which is $34.5 billion.
According to NHK, that’s the most any public Japanese company has ever made in a year. The company’s fourth-quarter (January-March) performance saw Toyota’s operating profits up 78%, which certainly helped.
Why did this happen?
The obvious thing is that this is the “Year of the Hybrid” and Toyota is the hybrid company, with the most accessible and varied range of products. Sales are way up and a lot of those sales are hybrids. The slightly less obvious thing is that the yen is down a lot to the dollar, which is good for a massive producer and exporter like Toyota.
Toyota’s CEO Koji Sato got into this in his prepared remarks:
In the previous fiscal year, our diverse product lineup enabled us to provide our customers with many cars. We believe that this achievement is the result of years of determined product-centered management and the building up of our business foundation.
From the stylish new Prius to the attractive new Camry and Tacoma, all of Toyota’s cars are appealing at some level. They’re rightly priced and rightly sized for the market. That, plus some favorable currency, is all Toyota needed to make all that money.
Were a few corners cut? Maybe. To make an omelet you gotta break a few Daihatsu engineers, amirite?
[Ed Note: It’s also worth noting that Toyota is making all this money while cleaning up its tailpipe emissions more than any other manufacturer. From the EPA’s 2023 Automotive Trends Report:
Between model years 2017 and 2022, Toyota achieved the largest reduction in CO2 emissions, at 32 g/mi. Toyota decreased emissions across all vehicle types and decreased overall emissions even as their truck SUV share increased from 27% to 38%.”
Toyota took a lot of flak from pro-EV journalists for its slow, measured wading into the EV waters, but it’s clear the company got it right. -DT]
Toyota Thinks It’s Going To Make Less Money This Year
The best time to make changes in your business is not when things are going poorly, but when things are going well. With that in mind, Toyota doesn’t want to rest on its yen and instead wants to be ready for the future.
Many journalists were critical of Toyota’s slow pivot towards electric cars, which looked short-sighted as recently as last year. While Toyota is behind the curve for this generation of electric cars, it might be ready for the next round.
Of course, in Toyota’s view that’s electric cars, plug-ins, and hydrogen:
This fiscal year’s key themes in working toward that future are the “materialization of multipathway solutions” and the “creation of a foundation for software-defined vehicles, done in the Toyota way” that will realize diverse mobility values for our customers.
Over the past year, we have been advancing toward embracing battery EVs, which were our missing piece[…]
Regarding hydrogen, we have accelerated the creation of foundations for commercialization in various regions.
In addition to developing and implementing hydrogen mobility in the commercial domain, we are also providing fuel cell systems for various applications, such as trains, ships, and generators, and pursuing initiatives in producing and storing hydrogen.
Hybrids, hydrogen fuel cell vehicles, software-defined vehicles, all of it. Oh, and e-fuels:
Furthermore, we will continue to work with determination on the future of the internal combustion engine. Even in a future in which energy centers on electricity and hydrogen, we plan to continue actively advancing next-generation engines, with an eye toward using e-fuel and other liquid fuels.
There’s a risk that by doing everything you’re doing nothing and, at the same time, you’re spending a lot of money.
From Reuters:
Toyota expects operating income to total 4.3 trillion yen in the year to March 2025, a 20% decline, as it invests in “human capital” – including providing support for labour costs at suppliers and dealers – as well as in its multi-pathway strategy.
“We’ll make investments in order to firmly protect the supply chain,” Toyota CEO Koji Sato told a press conference after the earnings release.
The silver lining for Toyota is that it has a lot of money to spend. When I was critical of GM for leaning into dividends instead of investment this is what I was talking about.
Wholesale Used Car Prices Down 14% Year-Over-Year
I like to look at this graphic from Cox Automotive/Manheim every month or so to see how close we’re getting back to any reality we used to know.
The impact of the pandemic and the resulting shortage of cars is pretty clear here as the Manheim Used Value Vehicle Index shows a sharp rise in 2020 and a slow retreat from the highs of 2022.
While this isn’t exactly a price, the index looks at average prices around a range of certain cars and adjusts by mileage/class, et cetera. This is as good as you can get to understanding the actual value of used cars at any moment.
Is it universal? It’s universal. From Cox Automotive:
The major market segments all experienced seasonally adjusted prices that were down year over year in April. Compared to April 2023, luxury was the only segment that lost less than the industry, down just 12.9%, and SUVs were down a little more than the market, falling by 14.6% year over year. The worst-performing segment was compact cars, down 17.6% against last year, followed by midsize cars, off by 16.8%, with pickups down 15.2%. Compared to last month, the pickup segment fell by just 1.3%, less than the market’s decline of 2.3% for the month. Compact cars fell the most against March, declining by 3.9%, luxury was down 3.2%, SUVs decreased by 3.1%, and midsize cars were down 3.0%.
This is good news if you’re a consumer, but BMW saw its revenue dip as it can’t just charge consumers basically the same price for an off-lease X5.
Rivian Lost A Lot Of Money
Whereas Lucid has Saudi Arabia to backstop its losses, Rivian has Daddy Amazon, but that money seems somehow less reliable.
Per Investor’s Business Daily:
Rivian announced a loss of $1.24 per share in the first quarter, down from a $1.25 loss a year ago, while revenue increased more than 80% to $1.204 billion. Analysts predicted a loss of $1.15 per share in Q1 with sales totaling $1.17 billion.
Meanwhile, Rivian ended Q1 with $7.858 billion in cash, cash equivalents, and short-term investments. Rivian ended Q4 with around $9 billion in cash.
Rivian also lost $38,784 per vehicle delivered in Q1. The EV startup said Tuesday it “expects significant improvement in the material and conversion cost of its vehicles and remains confident in its path to achieving modest gross profit in the fourth quarter of this year
That’s a long climb, but you gotta start somewhere. Rivian didn’t talk about a potential tie-up with Apple, whatever that might be.
What I’m Listening To While Doing TMD
If the top of this post means anything to you then you were probably hoping to see a Cash Money song today. I’m from Houston so I’m neutral when it comes to Cash Money or No Limit and merely enjoy both, though if I had to choose… Master P has a solid gold tank and I’ve always wanted to drive it, which I suppose makes me a No Limit Soldier for life.
But let’s go Cash Money today. Here’s Baby’s excellent “What Happened To That Boy” featuring Clipse.
This album has a classic Pen & Pixel cover, which is to say it has a cover made by a graduate of The Parson School who somehow, with his brother, ended up creating the most over-the-top and brilliant rap album covers of all time. Here’s an entire article on the Birdman album cover, which was the last one Pen & Pixel made.
The Big Question
Is Toyota right to go all-in on everything, or should the company maybe chill it on hydrogen?
Top image credit: Toyota; aleciccotelli/stock.adobe.com
Einstein says success is 99% perspiration and 1% inspiration. Sorry Oprah I favor Einstein because he actually created something not just marketing something. But hey give me a free car I may change my mind.
Toyota (and some its OEM brethren) wrote their own destiny. Good on them for their stellar financial results. That’s impressive.
However, Toyota did not and has not built and marketed any kind of mass market EV; in fact they actively marketed against BEVs (in Europe) and passively (in the U.S.). In other words, they didn’t bake chocolate chip cookies, didn’t offer them for sale, and did a very clever marketing campaign saying “wouldn’t you rather have these store-bought oatmeal cookies (that we have a very well-engineered and scalable supply chain already set up and supporting)?” Can’t blame them for it. They are incented to maximize their shareholder’s investment. However, saying “no one wants EVs and everyone wants hybrids” is a bridge too far. And Toyota builds stellar electric vehicles: the RAV4 Prime PHEV still has a waiting list, but it’s supply constrained. If Toyota is so into PHEVs as they repeatedly say, where is the Prime version of the Highlander/Grand Highlander (sure there is a Lexus version), Tacoma, 4Runner/Landcruiser, Sequoia, Tundra, Sienna, etc.? Again, it’s a bit funny to say “no one wants X” when a company isn’t offering X. Self-fulfilling prophecy, no?
It will be interesting to see if Toyota and the other OEMs can get their act together in time to catch the Chinese, especially for anything that’s not a body-on-frame pickup or SUV. If a customer wants a mass-market BEV sedan or hatchback, Telsa, Kia/Hyundai, and Volvo (EX30) will today or soon sell you one. And BYD just launched a PHEV pickup in Mexico. Hello? Is anyone paying attention?
Also, we drive a Toyota hybrid three row, eight person station wagon that can ford creeks and does pretty well off-road. It doesn’t really have a comparable on the market, so good on Toyota as it’s a lost sale for their competitors. That being said, it wlll get sold for the first 4×4 PHEV three-row that comes to market.
Yes and EVs are so far a failure. Why attack Toyota for a brilliant move?
Toyota got it right but the planet loses as a result.
Hybrids are a great step, don’t get me wrong, but if you read climate models, it’s too little too late. We need a world where everyone is driving BEVs and Battery first PHEVs with range extenders quick fast.
Tesla seems to have proven, curiously enough, that BEV Semi’s are possible, and practical in many, if not most scenarios, if we build out the charging infrastructure post haste.
I can’t blame Toyota for choosing to make money, but I am frustrated that we aren’t keeping the eye on the ball here.
I can give plaudits to Toyota for making people less afraid of battery tech.
this is true, but even if we did that it’s also still too little too late.
I think nuclearizing the containership industry and completely phasing out coal/natural gas for power production would shave off like 30-40% of global emissions very quickly. But good luck getting through all that red tape.
No, I think our salvation is likely going to be engineering based, like it has been since the dawn of human civilization. Humans are great innovators in the worst of times, but we can do miracles when our backs are against the wall.
BEVs are far from the answer to climate change. Considering the VAST majority of greenhouse gasses come from a relatively small number of corporations, BEV is a drop in the ocean. Consumer ICE cars have become the scapegoat and a full switch to BEVs tomorrow for the entire world would make little difference if manufacturing and shipping stay the same. In fact, becoming vegetarian is better for the planet than switching auto propulsion.
https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions
I agree and disagree. It’s true, the top 100 emitters should be reigned in and the greenwashing should stop. But as a consumer, we can do our part, greenwashing aside, where we are, without shaming each other. What I will not do is blame someone who cannot afford a BEV. But that said, used BEVs are getting pretty cheap these days. OTOH, I think that the vegetarian argument is also risky, because while I agree that we should be eating less beef, one of the reasons why farmers raise beef is because its a very easy way to remain a financially viable farmer… just barely, though, because something like four meat packing plants control the entire US market, so another monopoly. Thus a general breaking down of large corporatism towards family farming would do us all good, and steering us towards profitable family farms that are local, sustainable, and don’t rely so much on beef. So a tagline “become vegetarian” is masking a lot of problems on its own. There’s also serious evidence that while meat should be an infrequent part of the human diet, eliminating it entirely is problematic. https://www.bbc.com/future/article/20160926-what-would-happen-if-the-world-suddenly-went-vegetarian
BEVs are an easy win that we can do now. The other things we can push for, and I agree, but to suggest that BEVs are not part of the solution is an absurdity based on the data.
Yes and if we ignore the catastrophic results of building EV batteries they still don’t decrease the damage supposedly done as much as Hybrids. Enough of the crap demand that EVs are anything more than a marketing scam.
The data really are against you on that assertion. It’s true though that recycling/recovery of lithium and other battery components has not yet caught up to production, however, and that is still happening and is important. But once again, I’ve lived long enough to give quite a litany of assertions about ways in which new tech would fail and that market forces somehow magically took care of. To be sure, some new tech does fail, but if you see collapses in pricing, that’s a tip off that it’s going to be fine. BEV lifecycle emissions, lower than ICE or hybrids, often considerably. SolarPV lifecycle emissions also–you can google up a similar chart pretty quickly. https://arstechnica.com/cars/2021/07/electric-cars-have-much-lower-life-cycle-emissions-new-study-confirms/
Your rambling seems to support my assertions. Saying that time worn comments that science will catch up is just a way of saying it won’t work with the science we have now. Maybe science catches up but the stupidity of relying on it is in fact stupid.
It’s like telling your bookie don’t worry about my losses I’ll make it up with my future bets.
There have been a few media outlets in the last few years trying to call out Toyota for being behind the times. I’d love to see what they have to say now.
The Hybrid car has finally become, just a car for most people. The first Prius, which most people think of when Hybrids are brought up, is now 27 years old. There is now an entire generation of new car buyers that don’t know a world without a Hybrid car available to buy. There is no stigma around it for them. It’s not a statement car, it’s just a car.
Technology sometimes undergoes a revolution. But even then it takes time to penetrate the market and minds of buyers. Electric cars will get there too, as the tech gets better and a generation of buyers grows up with electric cars.
They will continue to ignore facts because they can never admit wrong. We don’t see it here either. Even now with proof fanbois refuse to see facts.
“What’s Toyota’s next act going to be?”-Matt Hardigree
Possibly the Toyota Stout. The (possibly)Ford Maverick beating, small truck they have for 2025.
From a Japan perspective, it’s very obvious. According to Nikkei Asia, the weakening yen added 685 trillion yen, $4.4 billion, to Toyota’s income over the financial year.
That is a year when the dollar rose from 135 yen to around 155yen. In 2021 the dollar was at about 105~110 yen, which makes the weak yen worth more than $10 billion in income to Toyota.
okay that makes sense why they would report yen instead of dollars because it looks better. If the yen was stronger they would probably report yen instead. Also i wonder about the cost of taxes from moving money from overseas to japan what the tax rate on that is.
The ONLY criticisms of Toyota’s strategy I still have are these:
1 – They don’t make nearly enough PLUG IN hybrids. Hybrids are great, plug in hybrids are greater.
2 – Hydrogen will never be the core fuel of consumer vehicles. Stop wasting your money.
3 – Stop trying so hard to have oddball styling. If you can’t stop yourself, sell two versions of each vehicle, one “fun, cutting edge” car, and another “boring” version. You’ll sell more than ever. Different bumper covers for various trim levels already exists. Take advantage of that to serve more customers.
Beyond that, Toyota deserves all the accolades they receive: they’ve earned them.
I think with PHEVs they are producing as many as they could make. The biggest issue toyota has is they literally can not build enough cars right now in every segment. Demand is high and while supply is high it is not high enough. Increasing capacity is tricky because it is a long term investment and if sales go down toyota would be holding the bag.
I’ve hated Toyota’s design language for a long time, exterior and interior, to the point that I can not even consider one. I’ve been okay with most Hondas. I hate plastic crap everywhere and oversized badges. I prefer minimalism.
I feel like maybe they’re already experimenting with weird/normal cars: the RAV4 and Venza. The RAV4 is Toyota weird and the Venza is almost normal styling, and these two are nearly in the same space.
Can we admit you have no experience knowledge or expertise on any of this?
Do all of your comments need to be inflammatory and poorly thought out?
Yes, I realize I’m feeding the troll but you are quite tiresome.
Thank you for reading.
How’s that?
Works for me, upvoted.
Besides, you had a take I agreed with recently. Maybe I’m coming over to the dark side.
Toyota will never behave like other carmakers. It’s special in an interesting way.
Toyota’s major shareholder is Toyota, which holds more than twice as many shares as the next largest which is Denso (an enormous supplier). Other major shareholders are Aisin (another enormous supplier) and Japanese banks along with various trusts with the name “Toyota” in them. These entities are comfortable with very long term strategy and steady dividends. Quarterly results aren’t a concern.
Thanks, I just learned something. It’s been clear for a long time that Toyota works with a foresight that other OEMs either can’t or won’t, but I never knew why.
Old age and treachery will overcome youth and skill.
I hope so. It’s the only chance I’ve got.
Toyota took a lot of flak from pro-EV journalists for its slow, measured wading into the EV waters, but it’s clear the company got it right. -DT]
That is a good summary of the situation.
Toyota is a perfect of example of why you don’t listen to investors. I’m sure they were screaming at Toyota to jump on the EV bandwagon and a weaker (or short-sighted) company would’ve caved to pressure.