Toyota Motor Corp., the giant of the automotive world, has hit another rough patch as its production and sales figures take a nosedive. After experiencing what many thought was the start of recovery, the company reported significant declines in both Japan and China, throwing cold water on any hopes for resurgence. The automaker revealed on September 27th, 2023, global output—including numbers from its subsidiaries Daihatsu Motor Co. and Hino Motors Ltd.—plummeted by 12.6% year-on-year, dropping to 808,023 units produced. This slump came on the heels of a modest gain just the previous month, as global sales decreased by 3.7%, erasing the tiny 0.7% increase seen in July.
Specifically, Toyota's sales within Japan fell more than 9%, largely as the company faced the consequential fallout from various recent scandals. These include instances of falsified vehicle safety certifications, which led multiple major Japanese automakers, including Toyota, to halt production on affected models.
Despite the negatives, there's been some bright spots for Toyota: the demand for hybrid gas-electric vehicles has surged. With the overall electrification of the automotive market witnessing stagnation, more consumers have gravitated back toward hybrids—though this shouldn't overshadow the challenges the company faces globally. The persistent downturn of the overall new car sales market and fierce competition particularly from Chinese brands are also causing headaches for the world’s largest automaker.
Indeed, the tough competition is particularly pronounced in China, where Toyota's sales dropped 13.5% to 152,065 units sold just last month. This downturn coincides with intensified pricing pressure as competitors like BYD Co. engage in aggressive price-cutting strategies.
Adding even more pressure, the EV market has also found itself facing headwinds. A recent report from Nikkei indicated Toyota has revised its ambitious sales projections for battery-powered electric vehicles (EVs). Originally aiming to sell 1.5 million units annually by 2026, the company has now scaled back this target to just 1 million. The numbers reveal the magnitude of the shift; Toyota sold 12,682 battery EVs globally last month, with nearly all of those vehicles (save for 119) being exported outside of Japan. Meanwhile, hybrids remained the bulwark of their sales with 336,848 units sold, showing a noteworthy 22% increase from the previous year.
The slow adoption of all-electric vehicles can be attributed to Japan's continuing preference for hybrids and traditional gas-powered cars, which dominate the market. Many consumers still remain cautious about embracing battery-only models, swayed by factors such as convenience, infrastructure, and perceived reliability.
Faced with these challenges, Toyota recently took proactive steps to stabilize its financial standing. Earlier this week, the company boosted its share buyback program, enlarging it to 1.2 trillion yen (around $8.3 billion). This included adding 200 billion yen to the existing stock-repurchase plan initiated earlier this year. Interestingly, Toyota’s operating profit for the latest quarter ending June surged to 1.31 trillion yen, marking a 17% increase year-on-year—benefits of which are partly attributed to favorable overseas revenue bolstered by the weak yen.
Other Japanese automotive players are feeling the strain as well. Honda Motor Co. reported its global production dropped by 11.3% to 307,870 units, with even more drastic cuts occurring within China, where production fell over 29%. The company is currently trimming its gasoline-powered vehicle manufacturing by nearly 19%—a deliberate shift toward enhancing electric vehicle production.
Nissan Motor Co. faced similar challenges as its production decreased by 15.5% year-on-year, producing 236,016 units last month, with sales dipping by 5.5% to 244,279. Recently, Nissan did announce plans to buy back 79.9 billion yen ($551 million) worth of shares from its French partner, Renault SA, aiming to realign their collaborative endeavors.
The automotive market finds itself at a tipping point, grappling with regulatory scrutiny, competitive pricing wars, and fluctuated consumer trends. Companies like Toyota, Honda, and Nissan must now navigate this dynamic environment carefully. While the pivot toward hybrid technologies may lend some temporary relief, the long-term sustainability of this strategy remains uncertain as the industry leans increasingly toward electrification.