Toyota Holds Back on New Investments After First Quarterly Profit Decline in Two Years

Toyota reported its first quarterly profit drop in two years as production setbacks and increased competition impacted its financial results. For the second quarter, Toyota’s operating profit decreased by 20% to approximately $7.55 billion (1.16 trillion yen), while first-half operating income fell to $16 billion (2.64 trillion yen).

The decline comes as Toyota faces reduced vehicle sales due to certification issues, halting production of popular models such as the Yaris Cross and Corolla Fielder in Japan. In the U.S., a recall of the Prius also contributed to lower global sales.

The company’s worldwide output decreased 7% year-on-year to 4.71 million vehicles, marking its first drop in four years. Toyota’s domestic and international production levels were impacted, with the company seeing a particularly sharp decline in China, where local electric vehicle manufacturers, such as BYD, continue to gain market share with competitive pricing.

In response, Toyota announced it would take a cautious approach to future investments, including those in electric vehicles (EVs) and hybrid technologies. Toyota’s Vice President Yoichi Miyazaki said the automaker will “hold off on HEV, PHEV, BEV, or FCEV investment decisions until the very last moment,” citing a need to maintain profitability while navigating an unpredictable market. “There are two main things we want to accomplish,” Miyazaki noted, emphasizing the importance of “responding quickly to environmental changes” and enhancing core capabilities for the company’s long-term sustainability.

Despite the investment slowdown, Toyota confirmed it is advancing battery technology, including the development of Ternary, LFP, and all-solid-state batteries. Earlier this year, Toyota turned its battery unit into a fully owned subsidiary, a strategic move aimed at optimizing production timing and enabling the company to quickly scale various battery types.

The company remains optimistic about recovering production levels in the second half of the fiscal year, forecasting a full-year output of 9.4 million vehicles, a slight decrease from last year’s total.