Examining Toyota's Plan for the Electric Age: Question-and-Answer Session Unveiling Fiscal Results
Toyota Maintains Car Sales Amid Extended Delivery Times
Japanese automotive giant Toyota has successfully navigated the challenges of extended delivery times by implementing a strategic approach focused on selling available allocations and boosting leasing penetration.
For over two decades, Toyota has followed a "product-centered management" strategy, and this approach has proven invaluable during the recent period of shifting production plans. Suppliers and the in-house manufacturing team have shown remarkable flexibility and tireless efforts, ensuring that Toyota remains competitive.
However, the financial results have been affected by fluctuations in foreign exchange rates and a sharp rise in material costs. Despite these challenges, President Koji Sato believes the company's financial results demonstrate the ability to outperform the previous term. The surge in overall material costs is beginning to level off, with some prices experiencing a slight dip.
Toyota's strategy for maintaining car sales during extended delivery times in 2025 involves focusing on selling available allocations rather than custom factory orders, which reduces wait times for most models. For high-demand models, especially hybrids and certain specialty editions, wait times still range from 3 to 4 months due to allocation constraints.
To make access to vehicles easier, Toyota dealerships are increasing leasing penetration, aiming toward pre-pandemic rates (25–30% for Toyota models). This move helps customers afford vehicles despite higher upfront costs and interest rates.
The company benefits from strong demand for hybrids, which are central to their growth strategy and profit margins, helping sustain sales even amid extended factory delivery delays. Tariff reductions and operational efficiencies also help Toyota maintain pricing power and profitability, enabling dealers to weather market turbulence and sustain sales volumes despite supply chain challenges.
Toyota is having detailed discussions about raw materials with primary suppliers and remains committed to robustly safeguarding its supply chain, including secondary and tertiary suppliers. As electrification changes the components that constitute a car, Toyota emphasizes mutual respect for each supplier's strengths and collaborates with them as partners in the carmaking process.
Domestic production remains the cornerstone of Toyota's pledge to safeguard Japan's manufacturing. As of the end of April, Toyota has taken in over 800,000 units as outstanding orders in Japan, with around 10% not delivered by the customer's preferred date. The company is committed to devising strategies to protect and enhance Japanese manufacturing.
In the face of these challenges, Toyota aims to ensure its cars don't become mere commodities and to gain appropriate recognition for the significant added value they provide. The company's financial report for the fiscal year ended March 2023 showed an operating income of 2.7 trillion yen. Toyota projects an operating income of 3 trillion yen for the fiscal year ending March 2024.
[1] Data from Toyota's official statement on delivery times for high-demand models. [4] Information from Toyota's quarterly financial report for Q1 2023. [5] Insights from Toyota's Q1 2023 earnings call with analysts.
- To cope with increased material costs, Toyota is engaging in intensive discussions with primary suppliers, aiming to secure its supply chain and navigate the complexities of electrification in the transportation industry.
- Despite financial challenges in the business sector, especially the fluctuations in foreign exchange rates and material costs, Toyota is confident in its ability to outperform the previous term, thanks to a strategic focus on selling available allocations and boosting leasing penetration in the finance sector.
- Leveraging strong demand for hybrids, Toyota is integrating technology into its automotive offerings, ensuring that its cars provide significant added value and remain competitive in the face of market turbulence, particularly extended delivery times in the transportation industry.