Shares of Toyota Motor (TM -0.13%) fell on Thursday after the company reported earnings, on concerns about a scandal in Japan and softening demand in China.
As of 11:30 a.m. ET, Toyota's American depositary shares were down about 5.6% from Wednesday's closing price.
Toyota's electric bZ4X is a solid entry, but the company's EV efforts still lag its global peers. Image source: Toyota Motor.
Earnings were good, but there are reasons for concern
Toyota's earnings weren't bad. The Japanese auto giant reported operating profit of 1.3 trillion yen ($8.7 billion) for the quarter ended June 30, in line with Wall Street estimates.
That was an increase of 17% from its operating profit in the year-ago period -- a good result, but not quite up to the growth that investors have seen in recent quarters. And there are increasing signs of bumps in the road ahead:
- Worldwide sales, already down 4.7% in the first half of the year, are facing growing headwinds in key markets including China and the United States.
- Toyota has been forced to temporarily suspend shipments of several models in Japan following revelations that several of its vehicles, including the Prius, weren't properly tested for collision safety. Sales in Japan were down over 22% in the first half of 2024.
In a further blow to the company's image, Japan's Transport Ministry on Wednesday ordered Toyota to make "drastic reforms" to ensure that new-model certification procedures are properly followed in the future. That order could roil Toyota's executive suite.
EVs continue to worry, but Toyota is still maintaining guidance
More broadly, Toyota has been under fire for dragging its feet on electric vehicle (EV) adoption, though it has recently had success with its hybrid models as consumer demand for EVs has slowed.
But there was also some good news in its earnings report: Despite the near-term concerns, Toyota maintained its prior guidance projecting a profit of 4.3 trillion yen for the fiscal year that will end on March 31, 2025.
