Toyota Is Making A Ton Of Money Thanks To Hybrids

Good morning! It’s Tuesday, February 6, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

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Contents

1st Gear: Toyota Boosts Annual Profit Forecast Thanks To Hybrids

Toyota raised its full-year operating profit forecast by a beefy nine percent following its third-quarter earnings results that blew analysts’ estimates out of the water. A weaker yen and strong sales of high-margin and hybrid vehicles are powering the surge.

This good news for Toyota comes at a time when most other automakers are experiencing slow sales growth and output cuts because of high interest rates and slowing demand for electric vehicles. From Reuters:

The Japanese automaker, a laggard in battery-powered EVs, is expected to outperform competitors this year, helped by robust demand for hybrid vehicles, which it pioneered more than a quarter century ago with the Prius model.

Toyota is likely to benefit from relatively higher margins on hybrids and the fact that some models tend to be costlier, said analyst Seiji Sugiura from Tokai Tokyo Research Institute.

Also selling prices are going up in the absence of discounts, he added.

Earlier, Toyota CFO Yoichi Miyazaki said that efforts to adjust production to better respond to demand for popular models had helped the automaker sell vehicles without resorting to the usual discounts and incentives.

The Japanese firm raised its profit forecast for the year ending March to 4.9 trillion yen ($33 billion) from 4.5 trillion expected previously. That is well above an average analyst forecast of 4.6 trillion yen, according to LSEG data.

Toyota’s operating profit in the third quarter that ended on December 31 was 1.68 trillion yen ($11.3 billion). That beat out the average 1.3 trillion yen profit estimate from analysts at LSEG, and you can thank hybrid vehicles.

Hybrid sales soared 46%, contributing to an 11% rise in overall vehicle sales. Hybrids accounted for around a third of the total sales of more than 10 million vehicles of its Toyota and luxury Lexus brands last year.

A weaker yen currency, which has tumbled around 10% against the dollar since end-2022, bolstered the impact of Toyota’s robust global sales.

The good news for Toyota keeps coming. North America, Toyota’s biggest market by volume, reported the strongest sales growth at 28 percent. Once again, you can thank hybrids.

Demand for hybrids is so strong that buyers have to wait for about a year to get deliveries of some models such as the Toyota Sienna multi-purpose vehicle, according to some U.S. dealers.

CFO Miyazaki said the share of hybrids in sales improved across all markets including China, where Toyota and many other foreign automakers are struggling due to growing competition from local EV makers, but warned that Toyota was not optimistic about conditions in the world’s biggest auto market.

Its home market Japan saw sales grow just 5% but reported the highest earnings and margin among its major markets.

Japan contributed two thirds of Toyota’s quarterly profit and generated a 20% operating margin, well above the company’s overall margin of 14% and North America’s 3.4%.

Toyota’s profit margin of 14% is far ahead of Tesla’s 8.2% as the U.S. automaker has been slashing vehicle prices in major markets including the U.S. and China to shore up demand.

No matter how you slice it, Toyota is killing the game right now, and a very slow transition to electric vehicles is playing a big role in that.

2nd Gear: Stellantis And Renault Aren’t Getting Together

Stellantis and Renault are just not that into each other, so quit bugging them! From Reuters:

Stellantis Chairman John Elkann said on Monday the automaker had no M&A plans in response to press speculation about a possible French-led merger with rival Renault

“There are no plans being studied regarding mergers of Stellantis with other manufacturers,” Elkann said in a statement, adding the group was focused on the execution of its long term business plan.

On Sunday, Italian daily Il Messaggero said the French government, which is Renault’s largest shareholder and has a stake in Stellantis, was studying a merger plan between the two groups.

This is good news. Stellantis was already getting a little too European for my liking. I miss the Challenger and Charger, man.

3rd Gear: Hertz Is No Longer Interested In EVs

Hertz is pausing plans to buy 65,000 electric vehicles from Polestar as the rental car giant continues to scale back its once-lofty EV ambitions. From Business Insider:

This comes just weeks after Hertz said it would sell off 20,000 EVs — one-third of its electric vehicle fleet — citing high repair costs as a key reason for this.

Hertz’s estimated $3 billion agreement with up-and-coming EV maker Polestar in 2022 was seen as a major moment for electric vehicle adoption.

It came after Hertz struck a similar deal with Tesla and agreed to buy 100,000 of its EVs in 2021. That deal has also had its issues, with Elon Musk’s barrage of price cuts driving down the value of Hertz’s fleet of used Teslas.

The rental company agreed to buy the Polestar’s vehicles over five years as part of plans to have a quarter of its global fleet be fully electric by 2024.

However, since then the global EV market has stalled, with demand for electric cars slumping and major automakers rolling back some of their investments.

That’s a problem for Hertz, which largely owns its vehicles outright and therefore faces big losses if their resale value falls.

The company said in January it plans to sell 20,000 EVs from its fleet, including Teslas, Chevrolet Bolts, and Volvos. Many are already available online at a steep discount.

It won’t be shocking to find out that this pause is not good news for Polestar. Just last week, part-owner Volvo said it would stop funding the Swedish EV maker, and the automaker is struggling to get customers amid a wider EV slump. It missed its 2023 delivery target.

4th Gear: Honda Recalls 750,000 Vehicles

Honda is recalling over three-quarters of a million vehicles in the U.S. because of a faulty sensor that may cause the front passenger airbags to go off when they’re not supposed to. That is less than ideal. From the Associated Press:

The recall covers certain Honda Pilot, Accord, Civic sedan, HR-V and Odyssey models from the 2020 through 2022 model years, as well as the 2020 Fit and Civic Coupe. Also included are the 2021 and 2022 Civic hatchback, the 2021 Civic Type R and Insight, and the 2020 and 2021 CR-V, CR-V Hybrid, Passport, Ridgeline and Accord Hybrid.

Affected models from the Acura luxury brand include the 2020 and 2022 MDX, the 2020 through 2022 RDX and the 2020 and 2021 TLX.

Documents posted Tuesday by the U.S. National Highway Traffic Safety Administration say that the front passenger seat weight sensor may crack and short circuit, and fail to turn off the air bag as intended. The sensors are required to disable the air bags if children or small adults are in the seats. If that doesn’t happen, it increases the risk of injury.

Dealers will replace the seat sensors at no cost to owners. Owners will be notified starting March 18.

Honda says that it has gotten 3,834 warranty claims, but luckily there haven’t been any injuries or deaths related to the problem between June 30, 2020, and January 19 of this year.