Toyota plans big push for electric vehicles in China

Toyota’s new chief executive vowed to accelerate its push on electric vehicles in China as it expects a 10% increase in annual operating profit to 3 trillion yen ($22 billion), the highest for a Japanese company .

The world’s biggest automaker has signaled it will return to the offensive, as it aims to sell a record number of vehicles this year in the wake of an easing of the chip crisis.

Koji Sato, who took over as head of Toyota earlier this month, he is tasked with maintaining leadership in an industry rapidly shifting towards electric vehicles and addressing the geopolitical risks posed by the US-China dispute.

For the fiscal year to March 2024, the group, which also owns the Daihatsu and Isuzu brands, would aim to sell a record 11.4 million units, up from 10.6 million a year earlier.

Toyotaincluding its luxury brand Lexus, it said annual global sales of battery-powered vehicles are likely to rise from last year’s 38,000 units to 202,000 units as it tackled its smaller offerings relative to competitors.

During the three months to the end of March, the company’s operating profit increased 35% from a year earlier to 626.9 billion yen, while revenues increased 19% to 9.7 trillion yen.

Shares of the Japanese automaker rose as much as 2.5% on Wednesday after it unveiled a plan to buy back shares worth up to 150 billion yen.

In a press conference, Yoichi Miyazaki, Toyota’s chief financial officer, said the company is now poised to produce a record number of vehicles this year following various measures taken to address shortages of semiconductor components.

“About a year ago, we didn’t have visibility into which chips would short at what point,” Miyazaki said.

“Our efforts are not complete, but our ability to manage chip supplies has greatly improved,” he added.

At the same time, officials also acknowledged the challenges Toyota has faced in China, the world’s largest auto market.

In recent months, Japanese automakers have released the steeper drop in sales in China among foreign brands due to the slow diffusion of battery-powered vehicles. Toyota’s 2022 vehicle sales in China, where it has about 9% market share, fell for the first time in a decade.

“The transition to battery electric vehicles [BEVs] in China it is fast, so we will aggressively launch BEVs,” Sato said. “At the same time, it is true that there is also a constant demand for hybrid vehicles… so we will work on both fronts.”

CLSA analyst Christopher Richter said Toyota’s guidance, which was in line with market expectations, looked conservative but still represented a good start for Sato.

“Outperforming these numbers will further strengthen his hand,” Richter added. “I was also pleased to see that executives were amazed by what they saw at the Shanghai Motor Show and have a keener appreciation for the competition. They need it.

Separately on Wednesday, three European asset managers said they had submitted a proposal to shareholders calling for better disclosure of Toyota’s climate-related lobbying efforts.

In recent years, Toyota has been targeted by AkademikerPension, a $20 billion Danish fund, and other European funds for its opposition to betting everything on electric vehicles.

The manufacturer of the hybrid Prius has long argued that a drastic switch to electric vehicles could pollute the environment if energy comes from fossil fuels, with hybrids providing a greener solution for the transition period. His board advised shareholders to vote against the shareholders’ proposal.