Toyota will invest 1.7 trillion yen in fields such as AI and electric vehicles, hoping to achieve “disruptive innovation,” and its profit for the 2025 fiscal year is expected to drop 20%.
Toyota couldn't help but fall behind; it's about to throw money to catch up.
On Wednesday, Toyota's chief financial officer Yoichi Miyazaki said that the company “lags far behind” Chinese manufacturers in some fields and will “endure” several years of difficulties and avoid getting involved in price competition with local brands.
“We need to think about how we can change the rules of the game by investing more.”
Yesterday, Toyota, the world's largest automobile manufacturer, handed over an impressive financial report. Driven by strong hybrid vehicle sales and a weakening yen, revenue for the fourth fiscal quarter of fiscal year 2024 increased 14% year over year, and net profit was 997.7 billion yen (6.41 billion US dollars), far exceeding expectations of 752.85 billion yen (4.84 billion US dollars).
Subsequently, however, Toyota said it is expected that profits for fiscal year 2025 will drop 20% as the company continues to increase investment in electric vehicles and artificial intelligence.
Hearing this news, I was shocked that Toyota's stock price dropped 3% for a while.
Toyota said that in order to achieve “disruptive innovation,” Toyota plans to continue to invest 1.7 trillion yen in “rapidly growing fields” such as artificial intelligence, electric vehicles, and software, and buy back up to 1 trillion yen worth of stocks.
Koji Endo, head of stock research at SBI Securities, said that due to Toyota's subsidiary Daihatsu Motor's fraud during crash tests, involving a large number of Toyota suppliers and employees, a decline in short-term profit growth is inevitable. But what was most surprising was Toyota's massive share buyback plan, reflecting the company's intention to take deeper changes.
Toyota CEO Koji Sato said that the company's development focus will be on “consolidating its position” and integrating mobile services and software businesses to ensure long-term steady development by reshaping a hardware-centered business model.
“In this fiscal year, we are committed to strengthening our position by investing the necessary funds and time”.
In late April, Toyota announced that it has established a strategic partnership with Tencent. Toyota will combine Tencent's AI model, cloud, digital ecosystem and other superior capabilities to create personalized and diverse mobile travel experiences for users.