In a surprising turn of events, Toyota Motor has defied concerns about the traditional car business, posting an operating profit of $11.3 billion for its fiscal third quarter. This robust performance exceeded Wall Street expectations of $9.2 billion, leading to a remarkable 10.8% surge in the world’s largest car maker’s U.S.-listed shares, reaching a record high of $224.46.
While Toyota’s vehicle mix transformation has been more gradual compared to U.S. counterparts Ford Motor and General Motors, the company has demonstrated resilience. Toyota anticipates wholesale unit sales of around 9.5 million for the fiscal year, with electrified models, primarily plug-in hybrids, accounting for 3.9 million. Despite electric models constituting only 1% of total volume, Toyota’s shares have soared over 55% in the past year, trading at around 10 times 2024 calendar year earnings.
In contrast, Ford and GM investors have faced challenges, with Ford shares remaining flat over the last 12 months and GM experiencing a 7% decline despite a notable 11% rise in U.S. car sales in 2023. Both companies have pivoted toward battery electric vehicles (EVs) and away from internal-combustion vehicles, whether hybrid or conventional.
GM’s 2024 guidance surpassed market expectations, projecting a $13 billion operating profit, compared to the consensus of $11 billion. Similarly, Ford expects to achieve approximately $11 billion in earnings for 2024, up from $10.4 billion in 2023, exceeding market consensus.
The success of Toyota in navigating challenges in the traditional auto industry serves as a positive signal for investors. While Ford and GM continue transitioning towards battery EVs, Toyota’s ability to adapt and maintain profitability in the traditional market demonstrates a potential blueprint for others.
Investors in the automotive sector are closely watching these developments, seeking insights into strategies that balance traditional automotive strengths with emerging trends in electric and alternative fuel vehicles.
China experienced deflation acceleration, and U.S. indexes, led by positive earnings, achieved record highs. The S&P 500 surpassed 5000 for the first time, with the Dow industrials remaining flat, the S&P rising 1.4%, and the Nasdaq Composite gaining 2.3%.
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