Despite the growing pressure for the automotive industry to shift towards electric vehicles, Toyota remains steady in its commitment to eliminating carbon dioxide emissions gradually. Some institutional investors have raised objections to this approach, but a report from Moody’s Ratings affirmed Toyota’s A1 rating and raised the outlook to positive, citing continued improvement in the company’s credit profile.
CreditSights, a Fitch solutions company, emphasized the need for Toyota to focus on the electric vehicle market, while acknowledging the success of its hybrid vehicles. Toyota’s automotive operating margin increased in the previous fiscal year, with electrified vehicles, primarily hybrids, accounting for a significant portion of its sales. The company has announced plans to invest heavily in electrification, with operating profit expected to decrease as a result.
Moody’s report on Toyota’s positives highlighted historically high levels of sales and profit, with expectations that these levels will be maintained in the coming months. However, the report also mentioned various challenges, such as regulatory changes, increased investments in electric powertrains, and rising competition globally. The rating also considered recent incidents of data falsification during government testing and significant capital outlays on Toyota’s expansion towards battery electric vehicles.
Toyota’s margin is expected to decrease slightly due to increased costs over the next year and a half, but Moody’s still anticipates the company’s earnings before interest, taxes, and amortization (EBITA) margin to remain strong. The upcoming annual meeting will address recent scandals, including issues with government vehicle testing rules and concerns about the board lacking independence. Toyota recently reaffirmed its commitment to internal combustion engines, unveiling a new generation of ICE engines designed to be used alongside batteries in hybrid and plug-in hybrid vehicles.
UBS, an investment bank, praised Toyota’s decision to expand its ICE electrification lineup, stating that it could lead to sustained growth and increased sales shares in the coming years. Despite the pressure to shift towards electric vehicles, Toyota’s global sales numbers remain strong, with the company selling the most automobiles in 2023 compared to its competitors. As Toyota navigates the evolving automotive landscape and invests in electrification, the company continues to focus on maintaining its market position and profitability.
