11 Feb 19

Toyota: Disappointing Q4 results, announcing worse

Toyota’s late entry to emerging technologies and the past year’s frantic investment spree to catch up on competition, is making some cracks in the foundation. The manufacturer published its 2018 Q4 results, showing a very modest operating profit of 0.4%, the worst results since 2017.

New Ecosystem

Toyota and many other OEMs seem to have trouble adjusting to a new world, where competition no longer comes from car manufacturers, but from Google, Tesla and advanced Chinese products. The lack of vision and anticipation, is costing other car makers a lot of money as well. Honda’s operating profit tumbled 40% in 2018 Q4 and Ford has reported a net loss.


Asked for an explanation, the Toyota executives explained that the operating profits are under pressure of the massive investments in R&D. For FY 2019, Toyota will be spending over a trillion JPY on R&D; the need for additional infrastructure and qualified engineering staff, is raising the fixed costs of the group with another trillion Yen.


Conservative in the first place, Toyota is now slightly adjusting downwards its forecast for 2019. Operating net profit is expected to reach JPY 1.87 trillion, against JPY 2.3 trillion predicted in January 2018. Revenue and operating profit remain unchanged and 10.55 million units are to hit the road in 2019.

Strategies and Tactics

In the meanwhile, it’s not easy to figure out what Toyota’s strategy is; the OEM confirms to spend now 35% of all R&D investments on next-generation technologies, it is joining forces with Panasonic to develop batteries, it has established itself in Silicon Valley, there’s a collaboration with GRAB, there’s a subscription based marketing model with Lexus… It looks like Toyota is applying a trial-and-error strategy whilst other car makers, although not more profitable than Toyota, at least understand why money is being spent.

Add to that the internal battles between Toyota the car manufacturer, Toyota the leasing provider and Toyota the financier and it becomes clear that the disappointing 2018 Q4 results will not be an isolated bad quarter.

Authored by: Yves Helven