Toyota’s big earnings surprise: It’s more profitable than Tesla

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move Tesla—

Toyota Motor

is the most profitable car manufacturer again. The change, revealed in Toyota’s earnings, shows how competitive the electric car market is becoming and what Tesla is doing to expand sales quickly.

Tuesday, Toyota (ticker: TM) reported earnings for the quarter ended June 30, its first quarter of fiscal 2024. Adjusted earnings per a share of 39 cents met Wall Street estimates, according to FactSet. Sales came in at about $74 billion, topping the consensus estimate of about $69 billion.

The results were good enough for Toyota investors. Shares rose 2.5% in overseas trade. Toyota’s US-listed American Depositary Receipts, or ADRs, rose about 1.8% in early trading. That

S&P 500
falls 0.3 per cent. That

Dow Jones Industrial Average
has increased by 0.1 per cent.

Toyota’s sales volume for the quarter reached 2.3 million units, up from two million units a year ago. What’s more, the operating profit margin came in at around 10.6%, up from 6.8% a year ago. It was the first time Toyota’s margin exceeded 10% since the last calendar quarter of 2021.

It’s a sign that supply chain problems that have plagued the global auto industry for years are abating. Shortages of parts, including semiconductors, limited production and increased costs for the entire industry.

Toyota’s margin also exceeded the 9.6% operating profit margin posted by Tesla in the second quarter of 2023. It was the first time Toyota has beaten Tesla on that metric since the second calendar quarter of 2021.

Tesla implemented significant price cuts in early 2023. The move preserved Telsa’s EV market share amid increasing competition, but cutbacks also ate into profits. The cost of buying traditional gasoline-powered new cars is still at or near record levels. Pricing still helps earnings at Toyota and its peers.

A measure of increased competition: More than 30 EV models sold more than 1,000 units in the U.S. in the second quarter of 2023. A year ago, the number was closer to 20.

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Tesla and Toyota are two very different companies, but they are the world’s most valuable car manufacturers. Tesla’s market cap is around $840 billion, while Toyota’s is around $270 billion.

One reason for the difference is that Tesla only sells electric cars, which are growing rapidly and taking share from traditional vehicles.

Toyota increased sales of battery electric vehicles by 623% year over year. Impressive, but Toyota still doesn’t sell many. The company sold 29,000 BEVs in the quarter, or about 1.3% of its total. Tesla is the world’s largest seller of BEVs. It sold about 466,000 in the comparable quarter, a record for the company and up about 83% year over year.

Tesla shares are down 1.8% in early trading. That

Nasdaq Composite
down 0.8%, but perhaps Toyota’s win also has something to do with Tesla’s decline.

Write to Al Root at allen.root@dowjones.com