Toyota is rusty but remains the most profitable manufacturer

Toyota is rusty but remains the most profitable manufacturer

Finally, he finds himself caught up in the conflict and imprisoned in China. Toyota saw its net profit fall 18% in its first fiscal quarter (April-June 2022 to 737 billion yen, 5.4 billion euros). And its operating profit fell by 42% (to 576 billion yen, 4.2 billion euros). With an amount of 6.8%, much lower than that of Stellantis (14.1% in the first half) or Volkswagen (9.7%). But, for this fiscal year, which will end on March 31, 2023, Toyota expects an annual profit of 2.36 trillion yen (17.4 billion euros), more than previously expected, even if it will be down 17% for one year, operating profit of 2,400 billion (17.6 billion euros, less than 20% over 2020-21) and an amount bordering on 7%, against 9.5% the previous year.

Sales would be around 10% compared to the previous year. And the Toyoda City group expects 10.7 million cars to be sold (including small cars from Daihatsu and heavy trucks from Hino), or 300,000 more than in 2021-22. Last year, Toyota was the world champion in car sales, ahead of Volkswagen, but also the champion in all profit categories (in billions of euros). From far away. Only marginally (as a percentage of sales) was Toyota left behind. The Japanese have never been characterized by large margins, but these have always remained more or less constant (8% in 2020-21, 8.2% in 2017-18). What is considered for Toyota is normal. Despite a weak first quarter due to production constraints, Toyota is optimistic eventually for the very honorable year 2022-23.

A closed domestic market

What are the historical recipes that allow the Japanese, despite the wind and waves, to demonstrate the success of violence over time? Several answers to this. First of all, the Japanese group is closing its domestic market, where it holds a dominant position with a market share corresponding to almost half of the car sales in Japan! Better: by taking shares of its partners Isuzu (utilities and pick-ups), Suzuki (small cars and small SUVs), Mazda or Subaru, he even directly controls almost 70% of the Japanese car market. Japan accounted for 55% of its operating profit in the first quarter, up 8.8%, above its average. The rest of Asia (including China) accounted for 35% of its quarterly operating profit, with a margin of 11.8%. Other regions were not so profitable. North America accounted for just 2% of Toyota’s operating profit, a record low at the start of the year. Europe had a weight of 3%, according to the tables published this Thursday, August 4 by the group. Toyota is defending its market share in the US and Europe, even if it means reducing its margin there (4.3% across the Atlantic, 2% in the Old Continent in this quarter).

Toyota is therefore still taking advantage of its dominance in the islands, protected from imports, but also in the rest of Asia, to earn money that can stimulate expansion elsewhere. Toyota had begun manufacturing in the United States by joining forces in 1984 with General Motors at its Californian plant in Fremont. Toyota then quickly freed itself from its mentor, establishing its first factory in the United States in 1986 and today becoming America’s second largest manufacturer behind GM, surpassing Ford and Chrysler. Established in the UK since 1992, Toyota took the unlikely bet of a foreign manufacturer setting up a car factory in France… in Valenciennes (North) to produce small cars there, which Renault and PSA in turn have moved out of France for cost reasons. Valenciennes now employs 5,000 people and produces the Yaris and Yaris Cross.

The keys to Toyota’s success are primarily found in Toyotism. The Toyota approach (The Toyota Way) It is actually a different model of management, studied all over the world. No other manufacturer has given its name that way. This shows how the first group of Japanese cars was used as a memory for a long time, to the point that the famous Toyotism was divided and taught by MIT (Massachusetts Institute of Technology) in the 1980s. The combination of consensus pragmatism, frugality, simplicity in constant efforts to constantly improve processes and quality, The Toyota Way always succeeds in this group, which his boss Akio Toyota is the grandson of the founder of the Toyota car business, Kiichiro Toyoda. Toyota also boasts that it is often ranked at the top of customer satisfaction surveys. The reliability of its vehicles has become a legend, as emphasized by the extraordinary success of the company and the taxis of Paris, but also its monopoly on pick-ups by armies or various rebel movements in Africa or the Middle East.

A successful hybrid bet

But process control does not explain everything. Toyota, whose range is the largest of all manufacturers in the world, has also, since 1997, hybrid bet (petrol engines with electric backup). At that time, the competitors looked down, laughing at this complicated technology that could never make a profit. The beginning was slow. But, Toyota now enjoys a green image thanks to this technology. Even if this popularity is mainly due to the lobby led by Toyota for decades. The diesel ban by the European public authorities program only favors… hybridization, which has now become the only way for internal combustion engines to reduce their CO2 emissions.2.

The hybrid reflects this long-term strategy at Toyota. The manufacturer sold 3.1 million electric vehicles in the 2021-2022 fiscal year, including 2.85 million hybrids. It expects to sell 8 million in 2030. Also ahead of fuel cell vehicles, Toyota has also delivered 5,000 hydrogen cars last year. It plans to launch a mid-range model in less than ten years, with running costs the same or lower than that of a battery-electric model. Toyota, on the other hand, is more hesitant about pure electronics, which only makes sense for short trips… Even if it starts. Toyota is suddenly the champion of the car market. This, constant since the beginning of the year, reached 250 billion euros. Against 90 billion for Volkswagen, 64 billion for Mercedes, 45 billion for Stellantis. Only Tesla, in the car, is far more than Toyota, at 960 billion dollars!