Toyota Overtakes Tesla's Profit Margin For First Time Since 2021

A Toyota Motor Corp. Land Cruiser 70 vehicle prototype on display during its world premier in Tokyo, Japan, on Tuesday, Aug. 2, 2023. Toyota is bringing its iconic Land Cruiser back to North America next year with slimmer dimensions and a lower price tag.
Photo: Akio Kon (Getty Images)

Toyota unseated Tesla as the most profitable car company in the world when it announced its earnings for its most recent fiscal quarter on Tuesday.

The Hype Behind Tesla Stock Success In 2023

The shake-up comes from a combination of factors; Tesla cut vehicle prices several times this year in order to boost the volume of vehicles sold, but at the expense of profit margins. When it initially claimed the profit’s crown in 2021, the company made some of its profits on strategies such as selling regulatory credits and investing in Bitcoin, rather than selling cars. Toyota, meanwhile, made its bundle of cash on selling more cars than anyone expected — 2.3 million vehicles for $74 billion over an expected $69 billion. That’s double the company’s previous quarter’s profits, according to Reuters. A benefit of the 2021’s chip shortage finally abating.

Toyota also hit 10.6 percent operating profit margin, up from 6.8 percent a year ago. Tesla managed a respectable 9.6 percent operating profit margin in its most recent quarter. Barron’s gives a good breakdown of what is going on between these two companies:

One measure of increased competition: More than 30 EV models sold more than 1,000 units in the U.S. in the second quarter of 2023. A year ago, the number was closer to 20.

Tesla and Toyota are two very different companies, but they are the world’s most valuable auto makers. Tesla’s market capitalization is about $840 billion while Toyota’s is about $270 billion.

One reason for the difference is Tesla only sells EVs, which are growing rapidly and taking share from traditional vehicles.

Toyota grew battery-electric vehicle sales 623% year over year. Impressive, but Toyota still doesn’t sell many. The company sold 29,000 BEVs in the quarter, or about 1.3% of its total. Tesla is the world’s biggest seller of BEVs. It sold about 466,000 in the comparable quarter, a record for the company and up about 83% year over year.

Of course, Barron’s also doesn’t mention Tesla’s CEO repeatedly stepping in it in front of everyone over on the Social Media Platform Formerly Known As Twitter. While news of Elon Musk’s acquisition of Twitter sent Tesla’s stock price into a tailspin, it’s largely recovered thanks to its Superchargers becoming the de facto charging network for many of the major automotive brands.