Toyota Financial Performance: Record Revenue Despite Scandal and Competition

Toyota did well in financial year 2024 (from April 2023 to March 2024). This is the best financial year for Toyota since 2012. It is surprising that Toyota did well because there was a recent scandal in the Japanese auto industry.

Specifically, Toyota made 45.1 trillion yen in revenue in fiscal year 2024. This is a large amount of money and is equal to about $311 billion. The company's profit from its core business (operating income) also increased significantly. In fact, it went up by 96.4% compared to the previous year.

Record Revenue Despite Domestic Challenges

Strong sales in Japan were a major reason for Toyota's success. Almost half of Toyota's revenue in fiscal year 2024 came from Japan. This is a significant amount of money, totaling 45.1 trillion yen.

North America was another important market for Toyota. It was their biggest market by unit sales, meaning they sold more cars and trucks there than anywhere else in the world. North America generated 17.9 trillion yen in revenue for Toyota.

The popularity of Toyota and Lexus brands helped drive these sales. These brands ranked very high in customer satisfaction surveys in the United States in 2023. In fact, Toyota was the second most popular car brand that people bought in the US that year.

Toyota Faces Increased Competition

Even though Toyota is very popular worldwide, they face tough competition. In fact, Toyota was the only car brand in the world to sell more than 10% of all new cars in 2023.

The Toyota Corolla used to be the most popular car model in the world, but it lost that title to Tesla's Model Y in 2023. Tesla sold about 1.15 million Model Y cars in 2023, while Toyota Corolla sales were likely lower.

Volkswagen is Toyota's biggest competitor. These two companies are always trying to sell the most cars and make the most money in the world. It's worth noting that Volkswagen also did well financially in recent times, partly because more cars were sold worldwide.

Toyota’s Testing Scandal

Toyota's great financial performance in 2024 might not last. There was a recent scandal where the company was caught not doing proper testing on their cars. This scandal also involved Daihatsu, a company Toyota owns.

Because of this scandal, investigators are looking into Toyota and Daihatsu. This investigation is likely to hurt Toyota's finances in the next year (fiscal year 2025).

Akio Toyoda Re-elected at Toyota Despite Governance Concerns

Akio Toyoda, the chairman of Toyota, was re-elected to his position along with the entire board of directors. This happened even though some investors who advise other investors (proxy advisors) said shareholders shouldn't re-elect Toyoda.

There were concerns about how Toyota is governed and recent scandals involving testing cars. However, Toyoda was still expected to win because:

• Other companies in the Toyota group own a lot of Toyota stock and voted to re-elect Toyoda.
• Toyota's profits are at record highs.
• Toyoda is popular with individual investors in Japan who buy and sell stocks on their own.

The exact results of the vote will be announced tomorrow. If a lot fewer shareholders voted for Toyoda than last year, it could hurt Toyota's reputation and lead to changes in how the company is run. This might include getting rid of some of the system where Toyota companies own stock in each other (cross-shareholdings).

Toyoda's approval rating has gone down because of problems with how Toyota tests cars for safety and other things. These problems also happened at Daihatsu, a smaller car company that Toyota owns. Some investors are not happy with how Toyota has dealt with these issues.

Proxy advisors recommended that shareholders not re-elect Toyoda because they are concerned that the board is not independent enough and that Toyota is not getting a good return on its investments. Investors from other countries, besides Japan, who own about a quarter of Toyota stock were expected to be the ones who mostly voted against Toyoda.

Toyoda is still well-liked by individual investors in Japan who own a little more than 10% of Toyota stock. They are happy with Toyota's recent profits and how the stock price has gone up.

Since the proxy advisors made their recommendations, there have been even more problems found with how Toyota tests cars. Toyota has apologized for these problems, but neither Toyoda nor the CEO addressed the concerns raised by the proxy advisors directly.

Shareholders also voted against a proposal that would have required Toyota to disclose more information about how it lobbies on climate change issues.

In short, even though Akio Toyoda was re-elected, there are still questions about how Toyota is governed and how recent scandals have been handled.

Bottom Line

Even though Toyota did well financially in 2024, it doesn't mean they can relax.

There are two main challenges Toyota faces:

• The recent scandal where they were caught not doing proper testing on their cars. This could hurt their sales in the future.
• More competition from other car companies, both old ones like Volkswagen and new ones like Tesla.

To stay on top, Toyota needs to come up with a good plan to deal with these challenges.