Toyota Anticipates 20% Profit Dip, Blames Rising Cost of Raw Materials

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Hours after Stellantis boss Carlos Tavares raised the alarm about the anticipated issues from raw materials and battery shortage at the FT Future of the Car 2022 conference, Toyota has come out to say its profits could fall by 20%, Reuters reported.
According to the leading global automaker ‘by sales,’ the unprecedented rise in raw materials costs could dent its fifth full-year profit. This is a serious red flag considering the Japanese automaker was able to shrug off the industry-wide semiconductor crisis in the earlier months owing to a massive stockpile of microchips.

On Wednesday, Toyota reported a 33% drop in its fourth-quarter operating profit and a 5% slip in shares. It’s the most significant one-day drop for the automaker in 2-years, closing at 4%.

Kenta Kon, Toyota’s chief financial officer, said there’s an urgent need to work on material inflation, ensuring a clear distinction between original manufacturers and suppliers.

Yesterday, Stellantis, CEO at the FT Future of the Car 2022 conference, expressed his concern over the usage of raw materials and working on solutions to prevent scarcity.

As raw materials get scarce, they get pricier forcing automakers to hike the unit price of their inventories. It’s also causing a supply chain issue, further worsening the situation in an industry under pressure with strong demand for new automobiles.

Toyota’s chief financial officer feels there’s a need to reduce the bulk of materials used and replace them with less expensive alternatives. The automaker said it expects the cost of materials to more than double to $11 billion in this fiscal year.

In January, the average price of a new vehicle in the U.S. was $46,404. The rate is expected to rise with skyrocketing raw materials prices, forcing more vehicle owners to hold on to their older units.

Toyota plans to sell more than 8 million units worldwide this year. It also intends to commit $70 billion to electrify its fleet by 2030. In December, Akio Toyoda said the company would increase its investment in battery development to $18 billion.
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About the author: Humphrey Bwayo
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Humphrey is a car enthusiast whose love and passion for automobiles extended into collecting, writing, driving, and working on cars. He got his passion for cars from his Dad, who spent thousands of hours working on his old junky 1970 E20 Toyota Corolla. Years later, he would end up doing the same with a series of lemons he’s owned throughout his adult life.
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