Toyota is back on the path to normalized production schedules following its vehicle certification challenges in Japan during 1H25 that disrupted production of certain models. The company expects 10 mn units of retail sales in FY25, which would enable it to retain its place as the leading global automaker by volume. Toyota expects sales of its hybrid electric vehicles (HEVs) to account for 46% of retail sales this year, up from 37% in FY24, which is beneficial to customers and the company alike as management claims its HEVs are more profitable than its ICE vehicles. While Toyota was late to the BEV party and BEVs account for a paltry 1% of its retail sales, it has made significant BEV investments that will support the rollout of new BEV models and volumes over the next couple years.

Consolidated vehicle sales are expected to decline by less than 1% YoY, unchanged from last quarter but modestly below its initial FY25 expectation for a modest sales increase of less than 1%. While management affirmed its vehicle sales forecast, it changed the regional composition of sales by boosting its projected sales in North America and Europe while lowering its forecast for Japan, Asia, and other regions.

The company raised its FY25 revenue forecast by 2% from ¥46 tn to ¥47 tn based on the regional shift in expected sales and currency changes. Management also raised its FY25 consolidated operating income forecast to ¥4.7 tn, up 9% compared to its previous forecast of ¥4.3 tn. The higher guidance is based primarily on currency impacts (+7%), especially transactional currency impacts on exports to the US, lower material costs (+3%), and marketing efforts (+4%). These benefits are expected to be partially offset by higher expenses (-2%) and other items (-3%), including the Hino Motors certification debacle.