(Bloomberg) -- Toyota Motor Corp. kept its annual profit outlook intact despite reporting quarterly results that were dragged down in Japan and China, as the carmaker showed signs of recovery from domestic scandals and major recalls in the US.
Operating profit was ¥1.16 trillion ($7.6 billion) for the June-September period, less than ¥1.44 trillion posted a year earlier and analysts’ average estimate for ¥1.25 trillion, the world’s top auto manufacturer said in a statement Wednesday. The company stuck to its full-year profit guidance of ¥4.3 trillion, helping to lift the share price.
Global car sales have taken a hit due to weak demand for new cars, while output cuts were caused by regulatory probes and recalls at home and abroad. Toyota’s sales in Japan fell this year due to domestic recalls of the Prius. Meanwhile, production in China declined as it struggled to keep up in an aggressive price war with BYD Co. and other local players.
Net sales for the quarter were ¥11.4 trillion, roughly the same from a year earlier.
Toyota trimmed its outlook for sales volume for the fiscal year through March, to 10.85 million units from 10.95 million, as output was negatively impacted by regulatory scandals involving falsified vehicle safety certifications.
The carmaker will return to an annual production pace of 10 million units during the second half, according to Chief Financial Officer Yoichi Miyazaki.
“Moving forward, we intend to reexamine our production process as we assess the impacts of verification issues on our manufacturing process,” Miyazaki said at a briefing.
Toyota shares rose 1.7% on Wednesday, leaving them up 3.6% this year.
Legacy brands continue to lose ground in China, where a wave of software-heavy, battery-electric vehicles have rapidly taken over the world’s biggest market for passenger cars. Toyota aims to sell cars by and for the Chinese people within the next two or three years, Miyazaki said.
The playing field could change after the European Union and US raised their tariffs on EVs from China. While BYD has yet to establish a lasting foothold in Japan, stricter import controls could pressure it to strengthen its push into emerging markets that have long been the stronghold of Japanese brands.
While Chinese firms have been on the offensive in Southeast Asia and Africa since before the tariffs went into effect, Bloomberg Intelligence senior auto analyst Tatsuo Yoshida sees them doubling down on those markets.
“Things haven’t gone well for Toyota in China, and it will continue to be a challenge for the time being,” Yoshida said. “Companies that can find income outside of China can afford to strengthen operations there, but those that can’t will struggle.”
Chief Executive Officer Koji Sato has pledged that Toyota will sell 1.5 million battery EVs annually by 2026, and 3.5 million by 2030. Since then, like most legacy carmakers, it has walked back those promises and gradually attributed more room to the upside potential of hybrid gas-electric cars.
(Updates with CFO, analyst comments.)
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