Unveiling Toyota's Strategy for the Electrification Era: Financial Results Announcement Q&A Session


Toyota's financial report for the fiscal year ended March 2023 indicated a projected operating income of 3 trillion yen. Amid the push towards electrification, the new management's strategy emerged from a Q&A with journalists.

Toyota's financial results for the fiscal year ended March 2023, announced on May 10, showed an increase in sales revenues but a decrease in profit. However, with signs of the semiconductor shortage beginning to resolve, Toyota projects increased sales revenues and profit for the fiscal year ending March 2024, including an operating income of 3 trillion yen.

An immediate report on the financial results was delivered by Toyota Times. President Koji Sato, reflecting on the results, stated, “In order to transition to the mobility industry, we will continue to increase our current R&D and capital investment of about 3 trillion yen, raise the proportion of future investments, and achieve sustainable growth.”

In his opening remarks during the financial results announcement, President Sato also explained the certification wrongdoing by Daihatsu Motor that was revealed in April, while also referencing Chairman Akio Toyoda's press conference on the same matter held in Thailand.

For the full statement and explanation by President Sato, click here.

In this article, we present the Q&A session with journalists divided into five key themes. The questions touched on topics such as the production forecast of 10.1 million units for the fiscal year ending in March 2024, strategies for navigating the expanding Chinese market in the age of electrification, and Toyota's approach toward its supplier relationships.

Topic I: Reflection on the results for the fiscal year ended March 2023

Question: As the President, what is your assessment of these financial results?

President Koji Sato

We achieved an operating income of 2.7 trillion yen, demonstrating our ability to outperform even the previous term.

If you look at the fluctuations in operating income, you will see the effects of foreign exchange rates and a sharp rise in material costs. However, thanks to various concerted efforts, we've been able to make improvements and secure our final earnings.

In short, it's been a challenging year, with major hurdles in manufacturing and delivering our cars to customers.

Nevertheless, I perceive that within our financial results lie elements that have ultimately strengthened the fabric of our corporation—innovations and relentless efforts that emerged precisely from these challenging times.

Specifically, our suppliers have been instrumental with their flexibility in adapting to considerable shifts in our production plans, not to mention the tireless efforts of our in-house manufacturing team and our dealership network, who've worked relentlessly to meet customer demands and ensure satisfaction. I believe these diverse efforts have come together to shape our current financial results.

Looking at it from a long-term perspective, we've been navigating a sustained deflationary trend. In the face of this, we've pursued a strategy of “product-centered management.” I believe that over the past two decades, we've successfully enhanced our product capabilities, not just domestically but also in the U.S.

Our ultimate aim is to ensure our cars don't become mere commodities. We work towards gaining appropriate recognition for the significant added value we provide, which in turn fosters a resilient business. We've worked to maintain this stance for many years, and as a result, I believe we've cultivated a corporate culture capable of generating profits, even in the face of challenging economic conditions or supply constraints.

In conclusion, I see these financial results as a testament to the strengthening of our company's foundation, both in the short and long term.

Question: Considering that car sales have played a significant role in increasing revenues, could you elaborate on how you managed to maintain these sales despite the prolonged delivery times?

Chief Communication Officer (CCO) Jun Nagata

Amid the challenges of extended delivery times, our communication strategy with dealerships has been incredibly adaptive, with a wide array of creative solutions implemented on a regional basis.

For our dealerships in Japan, where typically the delivery times have been substantially longer, our first course of action was to ensure we communicated clear delivery dates. If unavailable, we provided an estimate of when they would be delivered.

We found that the most significant source of customer stress was the uncertainty surrounding delivery procedures. Thus, we made sure to maintain frequent communication from our side, and that our dealerships are also committed to providing accurate and timely responses. This is, I believe, the foundation of our communication strategy.

Additionally, in Japan, we’ve experienced some delays in deliveries due to challenges associated with specific semiconductor types. However, as the situation is progressively getting better, I am confident that our communications concerning delivery times will steadily improve.

On the subject of extended delivery times, Yoichi Miyazaki, serving as Chief Financial Officer, reported, “We've taken in just over 800,000 units as outstanding orders in Japan, as of the end of April.” He added that “around 10%” of these have not been delivered by the customer's preferred delivery date.

Topic II: Relationship with suppliers

Question: Toyota clearly has the capacity to directly support its primary suppliers. However, I would like to know to what extent this support filters down to the secondary and tertiary suppliers, and how you’re overseeing this effect.

Accounting Group Chief Officer Masahiro Yamamoto

We are having detailed discussions about raw materials with our suppliers, starting with the primary suppliers with whom we directly interact.

As for our secondary and tertiary suppliers, I believe there are various opinions and honestly, we're still navigating that space. We remain committed to robustly safeguarding our supply chain.

Furthermore, the surge in overall material costs is beginning to level off, with some prices even experiencing a slight dip.

In particular, the rise in Japan's electricity costs over the past year seems to be maintaining its current level. We believe it's crucial to continuously monitor this while engaging in diligent discussions with our suppliers.

We're addressing these issues not only through dialogues with our suppliers but also by encouraging collective efforts within the broader context of the Japan Automobile Manufacturers Association and the industry as a whole.

Question: What is your perspective on domestic production? Also, as the share of electrified vehicles increases, the parts that need to be manufactured will change. How will you approach communication with your partner companies?

President Sato

At Toyota, we regard domestic production as the cornerstone of our pledge to safeguard Japan's monozukuri (manufacturing).

First and foremost, we want to maintain this standpoint as an unshakeable axis within our organization, and we are committed to devising strategies to protect and enhance Japanese monozukuri.

As for electrification, it's clear that the very components that constitute a car are bound to change.

On the other hand, rather than viewing our supply chain as a mere business relationship, we emphasize mutual respect for each other's strengths and strive to collaborate as partners in the carmaking process.

Each of our suppliers possesses unique strengths. When considering individual technological aspects, despite the changing components, there are a great many suppliers who excel in particular areas.

In these circumstances, we believe it is crucial to collaborate and communicate our vision for the cars we want to build earlier than ever before. By doing so, we can progressively shift the focus of our business to leverage these technological strengths as we explore the possibilities together.