Toyota facing scrutiny ahead of critical earnings report

Toyota’s upcoming earnings report will be put under a microscope after a flood of major challenges has damaged the brand’s credibility and performance.

Driving the news: Toyota faces three major problems that could put earnings at risk.

1. Slower sales: Toyota’s six-month deliveries report revealed a notable decline in global sales, which fell 4.7% from the first half of 2023.

• Although the brand’s U.S. sales did see a sizable year-over-year increase thanks to booming hybrid demand, these were negated by steep drop-offs in Japan (-22.3%) and China (-10.8%).

2. Scandals: Earlier this year, Japanese auto regulators found evidence of cheating on a series of safety certification tests at Toyota’s operations.

• Toyota has apologized for its questionable testing practices, but its confession is only the latest in a series of safety scandals.

• Both of the company’s subsidiaries, Daihatsu and Hino Motors, were implicated in cheating probes last year, further weighing down on the brand’s reputation.

3. Production shortfall: The automaker’s production momentum is fizzling out. Worldwide manufacturing is down almost 10% compared to last year.

• Prius manufacturing was put on hold for two months to fix an issue with the model’s door.

• Production of the Corolla Fielder, Corolla Axio, and Yaris Cross was also halted this year in response to the cheating allegations.

Bottom line: Toyota is still the world’s biggest automaker and one of the most respected car brands. But the company’s future success will hinge on overcoming this windfall of challenges and rebuilding trust with car buyers.

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